The new UK financial regulators currently being created need to be supported by strong systems of governance and accountability, the British Bankers’ Association has told HM Treasury.
In its response to the latest Treasury consultation on regulatory reform, the BBA supported the new focus on supervising individual firms while also monitoring risk in the economy, such as asset price bubbles. But it cautioned that in order to be fully effective the new regulators must be able to work together and must have appropriate governance and accountability mechanisms.
Under the reforms the Bank of England would have responsibility for monetary policy and financial stability, oversight of prudential supervision and payment and settlement systems, lender of the last resort and resolution authority – all under the same chairmanship.
The BBA also said:
- the new Financial Policy Committee (FPC) should define its remit as maintaining a stable and sustainable supply of credit to the economy, rather than maintaining “financial stability”, which in practice is difficult to define. A reliable credit supply is the practical outcome bank customers will expect from financial stability
- the new Prudential Regulatory Authority (PRA) should include among its objectives a reference to international competitiveness, innovation and growth. A strong regulatory framework should provide a strong platform for the UK financial services industry to achieve sustainable growth and success; and
- the Financial Conduct Authority (FCA) will have the power to intervene in the design of new financial products, but it is unclear how this might operate in practice, and what the FCA’s responsibilities will be if it were to intervene.
The BBA also welcomed the statutory duty of the PRA and FCA to coordinate their work and to agree a memorandum of understanding.