Recommendations & Conclusions
23 items
1
Recommendation
Fifth Report - The Future Framework for…
Acknowledged
We agree with the Treasury that the body of EU financial services rules that was on- shored during the process of leaving the EU should be moved into the regulators’ rule books. Keeping rules in statute could require Parliament to amend or pass new legislation every time that the regulators …
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We agree with the Treasury that the body of EU financial services rules that was on- shored during the process of leaving the EU should be moved into the regulators’ rule books. Keeping rules in statute could require Parliament to amend or pass new legislation every time that the regulators wish to make changes to them. This would be resource-intensive and impractical. The regulators have a key role to play in designing and developing the rules with appropriate Parliamentary oversight. We acknowledge that the process of moving rules out of statute will be time-consuming for the regulators and will be a heavy demand on their resources. It is important that the required resources are provided to ensure this process takes place efficiently.
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Government response AI summary
The government notes the Committee's view on moving EU financial services law to regulators' rulebooks and reaffirms its own proposed approach. It does not explicitly address the recommendation for providing required resources.
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HM Treasury
10
Recommendation
Fifth Report - The Future Framework for…
Acknowledged
Decisions by the Financial Ombudsman Service set precedents and form a critical part of the consumer conduct-focussed element of the regulatory environment for financial services in the UK. Given that the aim of the Treasury’s consultation is to create a more coherent framework for how financial services are regulated, the …
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Decisions by the Financial Ombudsman Service set precedents and form a critical part of the consumer conduct-focussed element of the regulatory environment for financial services in the UK. Given that the aim of the Treasury’s consultation is to create a more coherent framework for how financial services are regulated, the Treasury should consider as part of this consultation how the decision-making processes of the Financial Ombudsman Service would interact with the future regulatory framework for the FCA.
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Government response AI summary
The government acknowledged the recommendation, stating that they and the Ombudsman Service are currently considering whether any changes to existing arrangements are needed to ensure fair redress and awareness of wider implications.
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HM Treasury
11
Conclusion
Fifth Report - The Future Framework for…
Acknowledged
If Parliament itself is to play a role in the setting the regulatory principles of the FCA, it needs to be satisfied that the principles which it has set the FCA are not being undermined by decisions by the Financial Ombudsman Service. (Paragraph 57) Future scrutiny of financial services
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If Parliament itself is to play a role in the setting the regulatory principles of the FCA, it needs to be satisfied that the principles which it has set the FCA are not being undermined by decisions by the Financial Ombudsman Service. (Paragraph 57) Future scrutiny of financial services
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Government response AI summary
The government acknowledges the concern that Financial Ombudsman Service decisions should not undermine regulatory principles. They are currently considering whether any changes to existing arrangements are needed to ensure fair redress.
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HM Treasury
13
Conclusion
Fifth Report - The Future Framework for…
Acknowledged
We believe that effective scrutiny of regulatory proposals should be carried out through a targeted approach. Each new proposal made by the Financial Conduct Authority or by the Prudential Regulatory Authority under the future financial services regulatory framework would be put out for consultation. Industry stakeholders and civil society groups …
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We believe that effective scrutiny of regulatory proposals should be carried out through a targeted approach. Each new proposal made by the Financial Conduct Authority or by the Prudential Regulatory Authority under the future financial services regulatory framework would be put out for consultation. Industry stakeholders and civil society groups would have an opportunity to put forward views, as would Parliament, both through the select committee system and through the work of individual Members of either House. If any matter of public interest were to arise that we deemed sufficiently important to scrutinise in more detail, or indeed challenge, we would do so.
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Government response AI summary
The government welcomes the Committee's recommendation for a targeted approach to Parliamentary scrutiny of regulator activity, agreeing that it is an appropriate model.
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HM Treasury
14
Conclusion
Fifth Report - The Future Framework for…
Acknowledged
We have set out above reasons why we do not believe that Parliament or its committees need necessarily carry out detailed and comprehensive textual scrutiny for every new draft regulation or rule, although it would always be open to a committee of either House to do so. We envisage that …
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We have set out above reasons why we do not believe that Parliament or its committees need necessarily carry out detailed and comprehensive textual scrutiny for every new draft regulation or rule, although it would always be open to a committee of either House to do so. We envisage that scrutiny would be both “ex-ante” and “ex post”. “Ex-ante” scrutiny could be based upon expert analysis of draft texts, together with an exploration of representations made by industry stakeholders, consumer representatives and others, with robust challenge to the regulators when warranted. “Ex post” scrutiny might entail reviews of the impact of regulations and an assessment of the balance struck between protection for the consumer and effective operation for the industry.
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Government response AI summary
The government welcomes the Committee's recommendation that a targeted approach is the appropriate model for Parliamentary scrutiny of regulator activity.
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HM Treasury
15
Conclusion
Fifth Report - The Future Framework for…
Acknowledged
We do not see a clear need for the creation of a new committee or a new independent body to carry out this work. It would seem a more efficient use of Parliamentary resources to use the structures that are already available in both Houses. Although the scrutiny task will …
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We do not see a clear need for the creation of a new committee or a new independent body to carry out this work. It would seem a more efficient use of Parliamentary resources to use the structures that are already available in both Houses. Although the scrutiny task will be substantial, it will be an extended one as new regulations are drafted, rather than a short-term surge of activity. There is already expertise in select committees in the Commons and the Lords, and both have the power to appoint specialist advisers and commission research.
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Government response AI summary
The Government notes the Committee's conclusion but states that the appropriate scrutiny structure for Parliament is a matter for Parliament itself to consider.
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HM Treasury
16
Conclusion
Fifth Report - The Future Framework for…
Acknowledged
The creation of a new independent body to assess whether regulators were fulfilling their statutory objectives would not remove the responsibility of this Committee to hold the regulators to account, and it would also add a further body to the financial services regulatory regime which we would need to scrutinise.
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The creation of a new independent body to assess whether regulators were fulfilling their statutory objectives would not remove the responsibility of this Committee to hold the regulators to account, and it would also add a further body to the financial services regulatory regime which we would need to scrutinise.
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Government response AI summary
The government notes the committee's conclusion that a new independent body for assessing regulators is not needed, and reiterates that parliamentary scrutiny structure is a matter for Parliament.
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HM Treasury
1
Conclusion
First Report - Future of financial serv…
Acknowledged
The EU has reasons to be very prescriptive when setting its financial services rules: it must ensure that all member states are acting together and implementing the same rules consistently across multiple national legal systems. The UK, now that it is outside the EU Single Market, can operate with greater …
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The EU has reasons to be very prescriptive when setting its financial services rules: it must ensure that all member states are acting together and implementing the same rules consistently across multiple national legal systems. The UK, now that it is outside the EU Single Market, can operate with greater freedom.
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Government response AI summary
The government acknowledges the committee's observation and emphasizes the importance of regulatory independence, referencing the Financial Services and Markets Act 2000 (FSMA) and the FRF Review, and the need for parliamentary oversight.
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HM Treasury
2
Conclusion
First Report - Future of financial serv…
Acknowledged
Given that the UK has historically exercised significant influence in the framing of EU regulations, the UK’s exit from the European Union should not in itself be the cause of instant or dramatic changes to financial services regulation in the UK. Nevertheless, there will be opportunities to tailor inherited EU …
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Given that the UK has historically exercised significant influence in the framing of EU regulations, the UK’s exit from the European Union should not in itself be the cause of instant or dramatic changes to financial services regulation in the UK. Nevertheless, there will be opportunities to tailor inherited EU regulations to the UK market, and to seek opportunities for simplification, while being mindful of continued compliance with global standards. The new regulatory framework should aim to enable the regulators to respond more quickly and flexibly to new evidence about the effectiveness of regulation, and developments within financial markets.
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Government response AI summary
The government notes the recommendation, reiterating that regulatory independence is at the heart of the UK’s financial services model and referencing the FRF Review's proposal for a comprehensive FSMA model, balanced with effective policy input and oversight from Parliament and government.
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HM Treasury
3
Conclusion
First Report - Future of financial serv…
Acknowledged
The Treasury should respect the principle of regulatory independence, and must not pressure the regulators to weaken or water down regulatory standards, or to accept changes to the regulatory framework which could impede the regulators’ ability to achieve their primary objectives. The regulators have been made operationally independent for a …
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The Treasury should respect the principle of regulatory independence, and must not pressure the regulators to weaken or water down regulatory standards, or to accept changes to the regulatory framework which could impede the regulators’ ability to achieve their primary objectives. The regulators have been made operationally independent for a reason. If regulatory standards were to be changed or substantially weakened so as to increase the risks to financial stability, UK consumers and taxpayers could be harmed. Simplifying financial regulation and tailoring it appropriately to the UK market must be approached with care, and without compromising regulatory independence.
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Government response AI summary
The government acknowledges the importance of regulatory independence and highlights measures in the FSM Bill to increase regulator accountability to Parliament and strengthen their relationship with the Treasury.
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HM Treasury
4
Conclusion
First Report - Future of financial serv…
Acknowledged
We will remain alert for any evidence that regulators are coming under undue pressure from the Treasury to inappropriately weaken regulatory standards.
Government response AI summary
The government states that regulatory independence has been at the heart of the UK’s domestic model of financial services regulation for over two decades, and this remains central to the government’s approach.
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HM Treasury
6
Conclusion
First Report - Future of financial serv…
Acknowledged
The UK’s exit from the European Union has had an impact on the UK’s ability to export financial services to the EU. However, it remains the case that the UK still has many competitive strengths as a global financial services centre. Brexit has served as a catalyst for a renewed …
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The UK’s exit from the European Union has had an impact on the UK’s ability to export financial services to the EU. However, it remains the case that the UK still has many competitive strengths as a global financial services centre. Brexit has served as a catalyst for a renewed focus on the competitiveness of the UK’s exports, including financial services. (Paragraph 45) 54 Future of financial services regulation
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Government response AI summary
The government acknowledges the impact of Brexit on financial services exports but notes the UK's competitive strengths and the focus on competitiveness. It highlights tools for market access, regulatory cooperation, equivalence regimes, and FTAs.
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HM Treasury
7
Recommendation
First Report - Future of financial serv…
Acknowledged
There is a clear view from the financial services sector that co-operation between regulators is more significant than trade deals for ensuring reciprocal market access for financial services. While trade deals can open up new markets for financial services, the Government should strive to make progress on mutual recognition as …
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There is a clear view from the financial services sector that co-operation between regulators is more significant than trade deals for ensuring reciprocal market access for financial services. While trade deals can open up new markets for financial services, the Government should strive to make progress on mutual recognition as an element in any free trade agreement. (Paragraph 46) Regulatory objectives and priorities
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Government response AI summary
The government notes the recommendation. The UK has a range of tools to pursue new market access opportunities and closer regulatory cooperation in financial services with key international partners. The government works closely with the regulators to achieve progress. The government also operates a range …
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HM Treasury
9
Conclusion
First Report - Future of financial serv…
Acknowledged
In designing the new secondary objective, there should also be some consideration for the ways in which financial services serve the ‘real economy’. The financial services industry can help deliver economic growth not simply by growing itself but also by facilitating economic growth by providing capital, credit, insurance and other …
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In designing the new secondary objective, there should also be some consideration for the ways in which financial services serve the ‘real economy’. The financial services industry can help deliver economic growth not simply by growing itself but also by facilitating economic growth by providing capital, credit, insurance and other services to firms in the ‘real economy’.
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Government response AI summary
The government notes the recommendation and states that new secondary objectives for the FCA and the PRA introduce a new focus within the regulatory framework on the medium to long-term growth and competitiveness of the UK economy.
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HM Treasury
10
Conclusion
First Report - Future of financial serv…
Acknowledged
The Treasury should continue to reject any calls for a growth and/or competitiveness objective to become a primary objective. This would increase any pressure on regulators to trade off competitiveness against resilience, and would undermine the regulators’ ability to deliver on their core functions. There is a danger that as …
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The Treasury should continue to reject any calls for a growth and/or competitiveness objective to become a primary objective. This would increase any pressure on regulators to trade off competitiveness against resilience, and would undermine the regulators’ ability to deliver on their core functions. There is a danger that as memories of the financial crisis fade, its lessons are forgotten.
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Government response AI summary
The government notes the recommendation and has implemented new secondary objectives for the FCA and PRA to focus on growth and competitiveness, while maintaining high regulatory standards.
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HM Treasury
11
Conclusion
First Report - Future of financial serv…
Acknowledged
The regulations made by the FCA, and the manner in which it supervises and enforces those regulations, could have a significant impact on financial inclusion. However a primary role of the FCA should not be to carry out social policy, or to fill the gaps where it is Government that …
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The regulations made by the FCA, and the manner in which it supervises and enforces those regulations, could have a significant impact on financial inclusion. However a primary role of the FCA should not be to carry out social policy, or to fill the gaps where it is Government that ought to be stepping in and addressing these issues. Government, community, and individuals all have a role to play in tackling poverty, an issue which is far broader than regulation.
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Government response AI summary
The government notes that the FCA's objectives are already aligned with financial inclusion and does not consider a separate 'have regards' duty necessary.
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HM Treasury
15
Conclusion
First Report - Future of financial serv…
Acknowledged
Regulatory independence is critical for the competitiveness and effectiveness of UK financial services regulation. The host of new accountability mechanisms proposed by the Treasury must be carefully reviewed in this light, to ensure that regulatory independence is not compromised. These mechanisms largely seem reasonable as individual changes, but there is …
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Regulatory independence is critical for the competitiveness and effectiveness of UK financial services regulation. The host of new accountability mechanisms proposed by the Treasury must be carefully reviewed in this light, to ensure that regulatory independence is not compromised. These mechanisms largely seem reasonable as individual changes, but there is a risk that the collective impact could be excessive in its impact on regulators’ resourcing, as well as their ability to make decisions quickly where needed.
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Government response AI summary
The government is confident that the final package strikes the right balance between democratic accountability, regulatory agility, and regulatory independence and that the regulators will be responsible for operationalising the new accountability requirements set out in the Bill.
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HM Treasury
16
Recommendation
First Report - Future of financial serv…
Acknowledged
The Treasury should be sparing in its use of the proposed power to require regulators to review their rules, and should not use it to implicitly require the regulators to consider a general ‘public interest’ requirement for rulemaking. Each use of this power is a potential weakening of the independence …
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The Treasury should be sparing in its use of the proposed power to require regulators to review their rules, and should not use it to implicitly require the regulators to consider a general ‘public interest’ requirement for rulemaking. Each use of this power is a potential weakening of the independence of the regulators. Regulators should not be expected to reverse or adjust regulation where such regulation is deemed to remain appropriate to carry out the regulators’ statutory objectives. That being said, the regulators should not impose costs without being able to show benefits.
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Government response AI summary
The government states that the power to require a regulator to review its rules is designed to be used only in exceptional circumstances where the Treasury considers that it is in the public interest.
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HM Treasury
17
Recommendation
First Report - Future of financial serv…
Acknowledged
The Treasury has not set out the expected impact of this new power on regulatory resources. In order to avoid imposing a significant burden on regulatory resources to conduct these reviews, and to safeguard regulatory independence, the Treasury should fund these reviews itself, whether they are conducted by regulators themselves …
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The Treasury has not set out the expected impact of this new power on regulatory resources. In order to avoid imposing a significant burden on regulatory resources to conduct these reviews, and to safeguard regulatory independence, the Treasury should fund these reviews itself, whether they are conducted by regulators themselves or independent persons. Reviews of regulatory rules which have been imposed by the Treasury should not crowd out the budgets over which regulators have discretion for fulfilling their objectives. The imposition of such costs on the Treasury would also further help it consider whether all such reviews were necessary.
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Government response AI summary
The government notes the recommendation that the Treasury funds reviews conducted under this power and states the FSM Bill includes a requirement for the Treasury to ‘have regard’ to the desirability of minimising the impact of a direction on the regulator’s other functions before directing …
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HM Treasury
20
Recommendation
First Report - Future of financial serv…
Acknowledged
The FCA should consider how to improve its engagement with the poorest consumers, including seeking opportunities to improve the availability of data about people who are on the lowest incomes. The FCA must seek data on the issues vulnerable consumers experience directly. Civil society groups and other researchers can provide …
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The FCA should consider how to improve its engagement with the poorest consumers, including seeking opportunities to improve the availability of data about people who are on the lowest incomes. The FCA must seek data on the issues vulnerable consumers experience directly. Civil society groups and other researchers can provide a valuable input, but they are more constrained than industry in terms of access to funding. (Paragraph 124) Specific areas of regulation
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Government response AI summary
The FCA contributes to HM Treasury’s yearly report on financial inclusion and supports the Government’s leadership on this issue and is willing to discuss with the Government how any additional duty to report on their part could avoid duplication and provide benefit to those who …
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HM Treasury
21
Conclusion
First Report - Future of financial serv…
Acknowledged
We will conduct scrutiny of the Prudential Regulation Authority’s ‘Strong and Simple Framework’ proposals. We will examine the impacts of the proposed reforms on the safety and soundness of smaller firms, and whether the reforms would successfully reduce the burden of regulation for these firms.
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We will conduct scrutiny of the Prudential Regulation Authority’s ‘Strong and Simple Framework’ proposals. We will examine the impacts of the proposed reforms on the safety and soundness of smaller firms, and whether the reforms would successfully reduce the burden of regulation for these firms.
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Government response AI summary
The PRA agrees that transferring retained EU law would allow for a comprehensive and efficient policy framework, and is committed to working with Treasury and other regulators on the process.
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HM Treasury
22
Recommendation
First Report - Future of financial serv…
Acknowledged
In their review of Solvency II, the Treasury and Prudential Regulation Authority (PRA) should aim to secure a robust insurance regulatory regime that adequately captures risk and incentivises investment in infrastructure and business, but one that is also appropriately tailored to the UK market.
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In their review of Solvency II, the Treasury and Prudential Regulation Authority (PRA) should aim to secure a robust insurance regulatory regime that adequately captures risk and incentivises investment in infrastructure and business, but one that is also appropriately tailored to the UK market.
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Government response AI summary
The government notes the recommendation, referencing its objectives for Solvency II reform which include a vibrant insurance sector, policyholder protection, and long-term capital support.
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HM Treasury
25
Conclusion
First Report - Future of financial serv…
Acknowledged
There is a range of innovations taking place in payments systems and with alternative means of exchange, including crypto-assets, stablecoins, and central bank digital currencies. These innovations could provide opportunities to address weaknesses in international payments systems and potentially to serve consumer needs, and in the case of central bank …
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There is a range of innovations taking place in payments systems and with alternative means of exchange, including crypto-assets, stablecoins, and central bank digital currencies. These innovations could provide opportunities to address weaknesses in international payments systems and potentially to serve consumer needs, and in the case of central bank digital currency to safeguard monetary sovereignty. Future of financial services regulation 57 There are challenges associated with innovations in payments, including consumer protection, preventing crime and financial stability. We will be conducting further work on how these challenges are managed. (Paragraph 175) 58 Future of financial services regulation
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Government response AI summary
The government notes the opportunities and risks with innovation, outlining steps to regulate stablecoins, cryptoasset activities, and consumer protection measures.
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HM Treasury