Source · Select Committees · Treasury Committee
Fifth Report - The Future Framework for Regulation of Financial Services
Treasury Committee
HC 147
Published 6 July 2021
Recommendations
7
Para 50
If done with a deft approach, there may be a role for activity-based principles or...
Recommendation
If done with a deft approach, there may be a role for activity-based principles or “have regards” to allow the Government to instruct the regulators, at a more micro level, how it wishes them to approach specific types of business …
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HM Treasury
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Conclusions (19)
1
Conclusion
Para 27
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 …
2
Conclusion
Para 28
The Treasury consultation alluded to certain UK-derived rules that are set out in UK statute, and it suggested that regulators might be constrained as a result. But we found that the regulators did not appear to feel constrained by the existence of any domestic rules being set out in statute. …
3
Conclusion
Para 36
We understand the need for Treasury Ministers to be well informed of the regulators’ policy intentions as a matter of routine. However, we have not been provided with compelling evidence to justify changing the law to allow Ministers the absolute right to see financial services regulators’ policy proposals before they …
4
Conclusion
Para 37
The Treasury has in the past been able to delay policies in the interests of the wider negotiations that took place during the UK’s departure from the EU. This suggests that there is already sufficient and appropriate Treasury oversight of the regulators’ policy proposals without needing to put such a …
5
Conclusion
Para 38
If the Treasury does wish to give itself the formal power to see policy proposals before they are made public, comments or suggested changes to them using this power should be published alongside the public consultation.
6
Conclusion
Para 49
It is not clear to what extent the Treasury wishes to implement activity-specific regulation. While the proposal is a key aspect of the Treasury’s future framework consultation, when we asked the Economic Secretary whether the Treasury The Future Framework for Regulation of Financial Services 27 intended to move more towards …
8
Conclusion
Para 51
Regulating a company as a whole rather than by activity carried out should provide greater flexibility to regulators to respond to new activities as they develop, rather than needing new activity-specific principles or frameworks each time a new activity emerges.
9
Conclusion
Para 52
We will only be able to conclude with more certainty on the merits or risks of activity- based regulation once the Government provides more details on their proposals in its next consultation.
10
Conclusion
Para 56
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 …
11
Conclusion
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
12
Conclusion
We believe that a measure of “ex-ante” scrutiny by Parliament is necessary. But we do not believe that it would be proportionate for Parliament or its committees to carry out, as a necessary part of the rule-making process, the detailed and comprehensive textual scrutiny which the European Parliament’s Economic and …
13
Conclusion
Para 78
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 …
14
Conclusion
Para 85
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 …
15
Conclusion
Para 86
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 …
16
Conclusion
Para 87
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.
17
Conclusion
Para 88
Our Committee has been consistent in its regular monitoring of the work of the Financial Conduct Authority and of the Prudential Regulatory Authority, the extent to which they meet the objectives set for them by Parliament, and their responsiveness to consumer expectations. There is a strong logic in aligning the …
18
Conclusion
Para 91
The House could, if it thought it necessary to increase the capacity and broaden the expertise of the Treasury Committee in order to undertake scrutiny of financial services, expand the facility under Standing Order No 137A(1)(e) for non-members of the Committee to take part in certain proceedings. This provision currently …
19
Conclusion
Para 92
The House might also consider increasing the resources available to the Committee if it were, as we anticipate, to expand its existing responsibility for the scrutiny The Future Framework for Regulation of Financial Services 29 of financial services. Although the Committee already has the power to appoint specialist advisers, there …
20
Conclusion
We will continue to maintain an open mind as to how best to scrutinise the significant flow of financial services proposals that will be made by the regulators, and we look forward to engaging constructively with the Government and with others in Parliament once more detailed proposals emerge from the …