The Government has published legislation that will fundamentally transform financial regulation.
- Gives the Bank of England responsibility for protecting and enhancing financial stability
- Abolishes the Financial Services Authority (FSA) and creates the Financial Policy Committee, the Prudential Regulation Authority and the Financial Conduct Authority, also providing them each with powers to try to ensure the stability of the financial sector and the protection of consumers
- Empowers regulators to look beyond tick-box compliance with a regulatory culture of judgment, expertise and proactive supervision.
The 1000 page bill took more time to sort than expected, with various interests arguing over who should do what.
The transfer of powers from one regulator to another is not instant; it will take between one and two years.What is still missing is any exact dates.
The dust has not settled. MPs on the Treasury Select Committee still want some areas clarified and tightened up. Andrew Tyrie MP, says, "Force of argument seems to be winning the day on some key points. The proposals still fall short of what is needed."
Key battle point is between the Commons and the Bank of England, as Tyrie explains: "The role and accountability framework of the Bank of England should be decided by Parliament, with the executive explaining their decisions to MPs and the Treasury Committee, rather than negotiations between the Bank and the Chancellor.’
A final warning shot that regulation may not go as quickly as the government hopes, comes from those MPs "The fact that the Government has not waited to take account of the Treasury Committee's report on the Financial Conduct Authority highlights concerns that we are legislating too fast. We have to take the time to get this legislation right. This is only the start of the legislative process, however. Parliament must be given the time to discuss these important issues in greater detail."
MPs have already won several victories including that the government will wait until the FCA has bedded down before revisiting the issue of whether to pass OFT powers with respect to competition law to the FCA.