The Financial Conduct Authority has warned of the consequences of parliament being able to “call in” regulatory decisions, joining an argument that has pitted the UK's regulators against the government.
Speaking to the Treasury Committee yesterday (November 7), interim chairperson of the FCA Richard Lloyd said he had been clear with the government that the potential powers are of “great concern” to the regulator.
“Our reputation [is] as a country that is the best in the world in which to do financial services business, [and] that is clearly something we want to protect,” he said.
Lloyd said part of that reputation is down to the independence and effectiveness of regulators, and in his view, any change in that could risk the UK’s international competitiveness.
“The perception that comes with the ability of ministers to direct independent regulators will undermine our independence and we have been very clear with ministers that this is of great concern to us,” he said.
Call-in powers
The “call-in powers” will allow the government to instruct regulators to change rules if deemed in the public interest.
The powers were originally omitted from the financial services and markets bill earlier this year, however last month a spokesperson for the Treasury said it intends to bring an amendment to the bill to include these powers.
What is needed in times like this is stability Richard Lloyd, FCAWhen asked by the committee whether the introduction of the measures could represent a risk to financial security similar to the chaos caused by the “mini” Budget earlier this year, Lloyd emphasised the need for stability.
“At the moment markets are very volatile, and the actions of the government and parliament are being watched very closely," he said.
“In our view, what is needed in times like this is stability, evidence-based rule making, consistency, accountability and a clear plan for how that will happen.”
The FCA’s comments came after the governor of the Bank of England, which as a regulator would also be affected by these measures, emphasised the importance of its independence.
In a letter to Mel Stride MP, now the pensions minister, on July 27, Andrew Bailey said: “Regulatory independence is important…anything that would weaken the independence of regulators would undermine the aims of the reforms".
In the evidence session yesterday, Lloyd said the FCA has had “many” discussions with the government around the perception and reality of this measure being introduced, however it has not seen the amendment that has been spoken of.
There are very good reasons why enforcement has been separate from politics and parliament Nikhil Rathi, FCANikhil Rathi, chief executive officer of the FCA, said the regulator supports the bill and has worked “intensively” to ensure it is responsive to all requirements of it laid out in the bill.
He added that there was confusion over what constituted “in the public interest”, saying “I believe everything we do at the FCA…is in the public interest”.
Rathi added that no examples had been provided of previous issues with the FCA’s rules in the past.
“We [have] operational independence, that does not mean we operate in a vacuum,” he said.
“We’ve demonstrated we really understand the public policy environment that we are operating in.”
Rathi emphasised the importance of the role of parliament should any such measure be introduced.
“There are very good reasons why enforcement has been separate from [politics and parliament] once the overall framework is set by parliament,” he added.
sally.hickey@ft.com
