The Financial Conduct Authority will be handed powers to enable it to replace EU law with its own rules.
According to the Financial Services Future Regulatory Framework Review: Proposals for Reform consultation paper published yesterday (November 9), the government wants to give UK regulators the ability to replace EU financial services law with their own rules.
The proposals include changes to the regulators’ statutory objectives and new mechanisms for accountability, scrutiny and oversight of the regulators by Parliament, HM Treasury and stakeholders.
The document represents the government's plan to return responsibility for designing and implementing regulatory requirements to the UK regulators, a break from the approach under EU law.
It builds on the previous consultation which set out the government’s proposals for important changes to the UK’s financial services regulatory framework, and seeks to build on the UK’s existing model of regulation established by the Financial Services and Markets Act 2000.
The government said: “In many instances, the government would expect the regulators to initially replace the repealed provisions with rules that are similar to those which are already in place.
“However, this approach will allow the regulators to ensure that the rules are properly tailored for the UK markets, and appropriately reflect their objectives. It will also mean that the rules can be more efficiently updated in the future, for example in response to new global standards, or to take account of new business models.”
In the paper, the government also said it will focus on growth and competitiveness by introducing new, statutory secondary objectives for the Prudential Regulation Authority and the FCA.
The government said the regulators’ statutory panels will be able to provide earlier input into the policy making process.
It will therefore ask regulators to publish a statement on their approach to the recruitment of panel members, ensuring the membership represents a diverse range of views.
It is also proposing to amend the existing regulatory principles to ensure that sustainable growth should occur in a way that is consistent with the government’s commitment to achieve a net zero economy by 2050.
Chancellor Rishi Sunak said the proposals set out his vision for “an agile and dynamic approach to regulation that supports the growth of the UK economy”.
He said: “Earlier in the year, I set out my vision for an open, green, and technologically advanced financial services sector that is globally competitive and acts in the interests of communities and citizens across the UK, creating jobs, supporting businesses and powering growth across the UK.
“One important part of that vision is ensuring, as an independent nation, that we have a coherent, agile and internationally-respected approach to financial services regulation that is right for the UK.
“Today’s proposals will support the future strength of the UK as a global financial centre, ensuring an agile and dynamic approach to regulation that supports the growth of the UK economy, without diverging from our continued commitment to high international standards.”
The consultation will close on February 9, 2022.
Accountability
Aside from the regulators taking on new powers, the government also seeks to change the way it works with regulators.
It will introduce a requirement for the PRA and the FCA to respond to the recommendations issued by HM Treasury, and a new power for the Treasury to require the regulators to review their existing rules where the government considers that it is in the public interest.
In addition it is proposing new accountability mechanisms requiring the regulators to consider the impact of exercising their powers to make rules.
It said: “Empowering the regulators to set the direct regulatory requirements will allow for the necessary evolution of the rulebook, in a way that maintains the UK’s high standards of regulation.
“Transferring that responsibility to the regulators will require the government to gradually repeal significant amounts of retained EU law so that the regulators can replace it with the appropriate regulatory requirements in their own rulebooks.
“These measures seek to ensure that, as the independent regulators take on more responsibility for regulatory policymaking under the proposed approach, they can continue to be held to account by Parliament and HM Treasury for how they are advancing their objectives.”
sonia.rach@ft.com
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