Plans to boost scrutiny of regulators don’t go far enough, experts argue
New plans to boost oversight of financial regulators have been criticised by experts, as the government responds to concerns that watchdogs face too little scrutiny.
Earlier this week, the it was reported that the Treasury is planning to beef up the Financial Regulators Complaints Commissioner (FRCC) in order to more robustly hold regulators to account.
According to the reports, the Treasury will be able to appoint the FRCC’s chief and to direct the FRCC to look at specific issues.
The proposals come following widespread concern in both Parliament and the City that the Financial Services and Markets Bill did not do enough to improve the scrutiny of regulators, despite the range of new powers they are receiving post-Brexit.
Experts argued that the proposals were unlikely to fulfil the government’s ambition.
Macfarlanes’s public policy lead – and former Conservative justice minister – David Gauke told Morning Wire the proposals “may be welcomed by the industry… [but they] do not address the fundamental lack of accountability inherent in the post-Brexit regulatory system”.
Gauke pointed out that the FRCC won’t be able to provide long-term strategic recommendations. The proposals do not make clear whether it will pass judgements on whether regulators are complying with their objectives.
He also raised concerns about the potential politicisation of regulators at the expense of expert or parliamentary advice.
“The proposal to have the complaints commissioner directly appointed by the Treasury and to empower the Treasury to require the commission to address particular issues in its annual report seem to be an expansion of the powers of the executive to oversee the regulators, rather than allowing for more input from the industry, experts or parliament,” he said.
Head of Withers UK Financial Services Regulatory Group Harvey Knight said the current complaints commission is “toothless” and so the proposals do represent an “improvement”.
But Withers argued that improving regulatory scrutiny would be difficult without enabling the FRCC to order regulators to pay damages.
“The real issue is the regulators’ statutory immunity from damages and their protections from having to pay costs in contested cases,” Withers said.
Unless the FRCC is able to order regulators to pay “meaningful amounts of compensation…there will be no effective system of checks and balances…and they will remain, in effect, unaccountable.”
Partner at Reed Smith Romin Dabir said the amendment was a “significant development”, saying “existing measures to hold the regulators to account are not sufficient”.
But Dabir warned the plans could run into difficulties. “To be effective, the FRCC will need more resources,” Dabir said.
“Ultimately, the government will need to work to ensure that a possible solution on paper becomes a practical solution in reality.”
The Treasury declined to comment.