Government Publishes Financial Services Bill
The government has published the Financial Services Bill outlining the regulatory framework set to replace the Financial Services Authority.
Speaking in Davos at the Economic Forum, George Osborne said that the Financial Services Bill would also return ultimate control of the Bank of England to the Chancellor in the event of a crisis such as the Northern Rock collapse.
The proposals will provide a new regulatory framework with the creation of the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA).
In response, the Bank of England and Financial Services Authority has published a Memorandum of Understanding (MoU) which sets out a high level framework for how the two regulators will work together within the new regulatory system.
The Bank of England and FSA stress that ‘it will be vital that the two authorities pursue their own mandates, respecting the UK’s Twin Peaks micro regulatory system. But it will also be essential that they coordinate activities in some areas, and cooperate in others. The MoU sets out these arrangements to help ensure they are effective and efficient’.
Iain Coke, head of ICAEW’s Financial Services Faculty, said: ‘The splitting of responsibilities between the PRA and the FCA will not in itself ensure a better system. There is a limit to how far any regulator can be expected to control market behaviour. For example, the new conduct regulator will need to be more pro-active and more interventionist. But firms and consumers must also behave responsibly, and this means the regulator must drive culture change as well.
‘The government also needs to make the Bank of England more transparent. This Bill will gift it more powers at both a policy and supervision level. This must be accompanied by greater openness, scrutiny and accountability.’
The MoU will remain in draft form until the Financial Services Bill has completed its parliamentary process.