Recommendation 5

HM Government Acknowledged

We are mindful that our interventions impose costs on the firms that we regulate. We seek to balance these costs with delivering a strong system of regulation that offers long- term certainty to markets and consumers. This is vital to the UK’s reputation as a stable and attractive place to do business. Consumer protection, market integrity and business growth can be aligned. This is why we prioritise our work based on evidence of consumer harm or risks to market integrity, while making use of cost benefit analysis and post- implementation reviews to ensure the burdens of the rules we impose in the pursuit of our objectives are proportionate to the benefits. Well-regulated and functioning markets allow for businesses to raise finance and add growth and jobs, which is why we have also been taking forward ambitious reforms of the UK’s financial markets through the Primary Markets Effectiveness Review and supporting the Government’s Prospectus Regime Review, which aim to encourage businesses raise capital in the UK. The FSM Bill will enable us to deliver a number of reforms to the MiFID framework for secondary markets, in particular to the transparency regime for bonds and derivatives, the commodity position limits regime and the consolidation of market data. The Regulatory Initiatives Grid serves to ensure that, where we can, we provide notice of interventions in advance. Where it makes sense to consult on proposed changes together at the same time, we do so. A significant amount of coordination with the Bank of England, Prudential Regulation Authority (PRA) and HM Treasury goes into the Grid, alongside other regulators that play a key role in financial services; we are always open to suggestions from industry as to how it can be improved. We agree with the Committee that short-term costs should not be the main consideration when planning an intervention. However, as reflected in the report, the costs of regulation are ultimately passed on to consumers. Our recent three-year strategy set out several of the ways we are shifting our focus to prioritise outcomes over box ticking and processes, which will lead to an emphasis on the end result for consumers while reducing costs for firms over time. For example, our new Consumer Duty (now finalised in line with the timetable set by Parliament) will require firms to consider the impact of a product or service on the consumer, giving them flexibility as to how to achieve the best result. We will focus more on testing, and requiring firms to test, outcomes for consumers which should reduce the number of rule changes required, benefitting firms as well as consumers. We appreciate the Committee’s support for our work on the new Consumer Duty and expect that the Committee will continue to hold us to account on this as part of its ongoing scrutiny of our work and Transformation programme.