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Treasury adds ‘economic growth’ to proposed FCA duties

Treasury adds ‘economic growth’ to proposed FCA duties

The Treasury has added UK economic growth “in the medium to long term” to the Financial Conduct Authority’s proposed responsibilities which it intends to write into law.

Chancellor Jeremy Hunt said the City watchdog should have regard for the Treasury’s focus on boosting venture and growth capital “to support UK scale-up companies that face a particular finance gap”, as well as sustainable finance, long-term investments, and the mortgage market.

In a letter to FCA boss Nikhil Rathi, Hunt said “where relevant and practical” the FCA should take these considerations into account in its assessment of the costs, burdens and benefits of potential rules or policies.

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The additional focus forms part of a “secondary objective” put forward by the Treasury through the financial services and markets bill, which also asks the FCA to support the government’s objective of promoting international competitiveness.

The bill was introduced to parliament this summer, and repeals EU rules over the British financial services industry.

Consumer champion groups have expressed their fears that such a market-focused objective for a regulator like the FCA, which was founded to prevent consumer harm, could be jarring and lead to conflicts of interest.

In his letter to Rathi, Hunt said one of the government’s aims was to secure better outcomes for all consumers, including through “improved competition in the interests of consumers” and having regard to the needs of different consumers who use or may use financial services.

The chancellor went on to add: "These recommendations represent a clear and targeted approach to how the regulators can have regard to the government’s economic policy, while building on the important themes of competition, growth, competitiveness, innovation, trade and better outcomes for consumers from previous letters.

"The government is determined to unlock the full potential of the UK financial services sector. In order to achieve this the government is committed to the operational independence of the FCA and the financial regulators, balanced with clear accountability, appropriate democratic input and transparent oversight."

Hunt also cited “smart regulatory reform”.

Controversial “call-in powers” were to be included in the bill amendment alongside this secondary objective of economic growth and international competition, to allow the government to instruct regulators to change rules if deemed in the public interest.

But these powers were scrapped at the end of November. Jon Cunliffe, deputy governor for monetary policy at the Bank of England, had previously said the powers could hamper growth and result in the UK’s financial services sector being eschewed by foreign companies.