Former minister: Regulators need more scrutiny after receiving Brexit powers
Widespread concerns have been raised that too little is being done to improve the scrutiny of the UK’s financial regulators as the Financial Services and Markets (FSM) Bill passes through parliament.
Following Brexit, UK financial regulators – such as the PRA and FCA – were given the power to replace existing EU laws with new rules tailored to the UK market, significantly increasing their power and influence.
While there are existing avenues to scrutinise regulators, concerns have been raised that the FSM Bill – the largest regulatory shake-up in a generation – fails to increase accountability to capture these new powers.
Lord Bridges – a former minister in the ‘Brexit Department’ told Morning Wire “there’s widespread support on all sides of the House of Lords for greater levels of scrutiny and accountability of the regulators in light of the extra powers they’re getting”.
To improve scrutiny of the regulators, Lord Bridges proposed the establishment of an Office for Financial Regulatory Accountability (OFRA).
The office would “examine and report on the performance of the FCA and the PRA,” the amendment said, adding that the office must perform its duty “objectively, transparently and impartially”.
Lord Bridges said OFRA will enable “scrutiny based on fact about how the regulators are performing their role”.
However, Lord Bridges stressed that OFRA “is not a regulator of the regulators”.
Instead, the new body would be “a way of informing the debate about regulators’ performance with fact and opinion – which will not only improve scrutiny but should serve to strengthen the legitimacy of the regulators themselves.”
Its purpose would be to improve and strengthen parliamentary scrutiny rather than replace it.
It could perform a similar role to the Office for Budget Responsibility created by the government in 2010 which subjects the government’s economic policies to scrutiny and challenge.
Supporters of Lord Bridges’ amendment share the concern that regulators have received new powers without increased levels of scrutiny.
Speaking in the House of Lords, Lord Tyrie said “the Bill (FSM) confers huge new powers on the regulators, repatriated from the EU, without making any meaningful suggestions to make them more accountable when they exercise those powers.”
Similarly, Lord Forsyth of Drumlean said the additional powers transferred to regulators was “quite frightening” given the “lack of ability to actually see what they are doing”.
City groups such as Canada Corporation and TheCityUK have also shown support for OFRA. .
Canada Corporation told Morning Wire “the idea of an OFRA is an interesting one and such a body could provide additional expert resources to scrutinise the regulators’ performance.”
TheCityUK’s CEO Miles Celic noted “regulators should not be marking their own homework”.
“There needs to be some sort of mechanism to ensure that doesn’t happen,” Celic continued.
While the regulators already face Parliamentary scrutiny through the Treasury Committee, the government has proposed its own plans to improve scrutiny of regulators in the light of the extra powers they are receiving.
The FCA and PRA will be required to establish statutory cost-benefit analysis panels with a chair appointed by Parliament.
The Bill also includes a new rule review function that would enable the government to request the PRA or the FCA conduct a review of their rules in the public interest.
A Treasury Spokesperson said: “In transferring these powers from Brussels to our independent regulators – it’s important there are appropriate mechanisms in place for enhanced regulatory accountability.”