The Treasury Committee has published its report on the future framework for regulation of financial services. The report considers the future of financial services following the end of the Brexit transition period and examines how financial regulations should be set and scrutinised by Parliament. Key aspects of the report include:
- Ownership of financial regulation – the Committee agrees with the Treasury that the EU financial services rules that were onshored during the Brexit process should be moved into the regulators’ rule books as keeping the rules in statute could require Parliament to amend or pass new legislation every time regulators wished to make changes;
- Regulatory independence – the Committee does not believe there is compelling evidence for legislating to allow Ministers the absolute right to see regulators’ policy proposals before they are published for consultation. Retaining the independence of regulators from political interference is essential to ensuring the UK remains a world-leading financial centre;
- Activity based principles – whilst there may be a role for the government to use ‘activity based’ principles to instruct regulators’ approach to specific business sectors, the government should be sparing in this respect. Too many ‘activity based’ principles would add a further layer of issues to which regulators would have to have regard;
- Financial Ombudsman – the Committee supports the Treasury’s consultation to create a more coherent financial services regulatory framework but recommends that the Treasury considers how the decision-making processes of FOS would interact with the future regulatory framework for the FCA;
- Parliamentary scrutiny – the Committee does not see a clear need for the creation of a new committee or independent body to scrutinise financial regulations. A more efficient use of Parliamentary resources would be to use the structures already available in both Houses.