Liz Truss eyes merger of regulators

Liz Truss eyes merger of regulators
Liz Truss, foreign secretary and Tory leadership candidate (Credit: Mark Marlow/EPA-EFE/Shutterstock)

Conservative party leadership candidate Liz Truss is eyeing up plans to merge three of the financial regulators, but advisers say her plans are destined to fail.

According to FTAdviser's sister title The Financial Times, Truss will launch an immediate review of the roles and responsibilities of the regulators if she wins her party's leadership election next month.

It could see the Financial Conduct Authority, the Prudential Regulation Authority and the Payments Systems Regulator rolled into one new body.

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The Financial Conduct Authority is responsible for ensuring financial services professionals adhere to rules on issues of conduct, including charges and fees, the fair treatment of customers and advice suitability. 

It has around 4,000 staff overseeing firms from financial advisers and pension providers to asset managers and large high street banks. 

Meanwhile the PRA, which has around 1,250 staff, sits within the Bank of England and is responsible ensuring the soundness and stability of the biggest banks and insurers to make sure they are not "too big to fail". The PSR, with approximately 130 staff, operates as a subsidiary of the FCA to oversee e-money services.

The PRA and the FCA came into existance following the 2008 financial crisis when the Financial Services Authority was broken up.

Discussing the potential merger, Unique Financial Planning managing director Philip Martin said: “Here we are back again, looking to combine prudential regulation and supervise conduct in one body. 

“It was perceived not to work when tried earlier this century and, if the motive is politically-driven by anti-technocrat sentiment or a desire to save overall costs (in a system that is under-resourced compared with other similar sized markets), it’s likely to suffer the same fate.”

Earlier this month, Truss said she would "sort out" the problems with doctors’ pensions to tackle the staff retention crisis, though she has not yet said how she would go about doing this.

In recent months, the FCA has been criticised for its handling of the London Capital & Finance mini-bonds scandal which was dubbed one of the "largest regulatory failures in decades" at the time.

In December 2020, there was also an independent investigation into the FCA’s handling of LCF by Dame Elizabeth Gloster, published in December last year.

Chartered financial planner at Red Circle Financial Planning Darren Cooke argued there was room for improvement but questioned whether merging the regulators was the one.

"I have little doubt that the FCA needs reform but that is probably because it is too big and has too much to cover, rather than combining them and making it even bigger with even more to cover," he said.

"I think we would be better served by breaking up the FCA to bodies that regulate the separate parts of the financial sector. Then they can gain a deeper knowledge and understanding of the sector they are responsible for and work with it to improve standards and outcomes for clients."