The government has backed down in a row over potential powers allowing Westminster to intervene in financial regulation.
The controversial ‘call-in’ powers would have allowed the government and Treasury to force regulators to make, amend or revoke rules if it was deemed in the public interest.
The powers were due to be included in the financial services and markets bill, currently making its way through parliament, however this plan has now been abandoned.
In a statement yesterday (November 23), Andrew Griffith, economic secretary to the Treasury, said the government has decided not to proceed with the ‘intervention power’ at this time.
“Having consulted further, we are of the view that the existing provisions in the bill are currently sufficient and will already allow us to seize the opportunities of Brexit by tailoring financial services regulation to UK markets to bolster our competitiveness,” Griffiths said.
The bill repeals EU rules over the British financial services industry, and gives the FCA greater responsibility to set requirements for financial services companies.
It will also be required to promote growth and competitiveness in the sector.
“We have always been keen to find the right balance between increased responsibility for the regulators, with clear accountability, appropriate democratic input, and transparent oversight,” Griffiths added.
“We remain committed to the operational independence of the financial services regulators."
FTAdviser understands the government is to keep the matter under review, and will revisit it if it thinks the regulatory framework is not able to fully support the government’s plan for the UK’s financial services sector.
The bill will include a new secondary growth and competitiveness objective for the FCA, as well as a ‘rule review’ power allowing the Treasury to force regulators to review their rules if it is in the public interest.
The powers threatened to pit parliament against regulators, after fierce opposition from the BoE and FCA.
Jon Cunliffe, deputy governor for monetary policy at the central bank previously said the powers could hamper growth and result in the UK’s financial services sector being eschewed by foreign companies.
“The bill gives us flexibility…but that needs to be underpinned by a strong regulatory framework and independent regulators and that is best practice in most advanced economies,” Cunliffe said.
At a dinner last month (October 27), Sam Woods, chief executive of the Prudential Regulation Authority and Nikhil Rathi, head of the Financial Conduct Authority, warned about the change, which Woods said would represent a “significant shift” away from a model of independent regulation.
Rathi said: “[it is] vital that [the FCA’s] independence and agility at speed [was] not undermined by any proposed call-in power”.
The powers were also criticised by the then interim chair of the Treasury committee, Dame Angela Eagle, who told Griffith the powers were controversial and potentially risky.