Government must ensure that added responsibility placed on regulators is accompanied by accountability

The Financial Services and Markets Bill is currently making its way through Parliament and when, as seems likely, it becomes law, it represents a significant once-in-a-generation opportunity for our industry as well as the broader financial services sector.

At its core, what it provides for is the ability for the UK to revoke on-shored EU law and replace it with bespoke provisions which better fit the way in which domestic markets operate. For our sector, this means that longer term changes to PRIIPs, MiFID and assorted Handbook rules which are currently governed by retained EU Law are ripe for change.

But these changes are for the medium to long term. The Bill, by its nature, is broad. It means that changes can be hung off it rather than directly legislated for.

However, there are specific issues within the Bill that continue to occupy the attention, and it is the introduction of a secondary objective for competitiveness and growth for the Regulator which is giving us the most pause for thought. To be clear, this is an objective that PIMFA strongly agrees with. The question we are mostly concerned with answering is ‘how does one measure it and, secondly, how are they held accountable for it?’

Competitiveness in and of itself is a reasonably nebulous concept. The UK Financial Services system is already one of the largest in the world and remains one of the UK’s most valuable assets. Businesses in UK Cities and high streets up and down the country form a huge part of this and London – the centre of this– remains a vital gateway to the rest of the world and we are confident that, regardless of the direction of future policy and regulatory intervention, it will remain one of the great global centres for financial services and a global force for wealth management.

The role of the regulator going forward will be to ensure that this remains the case with the imposition of proportionate regulation, the timely approval of new and innovative business and, as we have written in these pages before, adequate and proactive enforcement of it when harm is being introduced.

How we measure that annually is an extremely interesting question and it is for that reason that we support proposed amendments in the Bill, brought forward by Craig Tracey MP, to provide an assessment of how the FCA’s performance in fulfilling the competitive and growth objective is being met.

However, reporting and measuring form only one side of the puzzle.

It remains a point of concern that the levels of accountability which our regulatory system is subject to remain somewhat inadequate. This is not to be taken as a criticism of either the Regulator or indeed Parliament, but the breadth of both of their respective responsibilities means that the current processes of accountability can only ever be light touch. Parliament is unable to scrutinise the decisions and actions taken by the regulator in response to a variety of issues.

Our current system compares extremely unfavourably, for example, to colleagues in the United States who have well-staffed committees and forums to provide forensic oversight over their regulatory system. It is for this reason that we strongly believe that a sub- committee should be introduced to properly oversee our regulators in Parliament and provide space and adequate staffing to fully interrogate its day to day activities.

Our regulatory system is in the process of being overhauled and this should be exciting to many people reading this column. But, as we look to consider how we can better make rules that work for UK domiciled firms, it is right that we also look at whether or not other systems that we have always had control over could be ripe for renewal or change.

As the Bill continues to make its way through Parliament, we fervently hope that members will see an opportunity to consider how they can work in tandem with the regulator to build a regulatory system fit for purpose and fit for the future.