Recommendation 75

The secondary objective has been in place for almost two years. It has catalysed a renewed focus on the efficiency of regulatory practice and focused the regulators’ efforts on removing the barriers to growth and international competitiveness in the sector. However, it is not yet clear whether the relationship between financial services regulation and growth of the wider economy has been clearly evidenced or established. We have demonstrated that there are areas where regulation plays a role in wider economic growth—capital requirements being the key example—but we have not received any evidence that the secondary objective is likely to have a significant impact on the growth of the wider economy. The introduction of a secondary objective, in addition to the numerous other requirements placed on the regulators, where they do not have the mechanisms to produce the outcomes the objective requires them to, risks diluting the regulators’ focus on their core responsibilities of ensuring financial stability, consumer protection, market integrity, and competition, in addition to complicating accountability.