When legal cutover comes in April 2013, the Financial Policy Committee (FPC) will be responsible for the macro-prudential regulation of the UK's financial services industry. This means that the FPC will be tasked with keeping a watchful eye on the entire financial system in the UK, looking out for potential systemic risks and addressing them. To achieve this considerable task, it will have a number of regulatory powers and tools at its disposal and this month HM Treasury has published a Consultation Paper which looks at these tools and how the FPC will use them.
In addition to its role in making recommendations to the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) where action is necessary to protect the UK's financial stability, it is proposed that the FPC be allowed to make recommendations to HM Treasury too, with regards to HM Treasury's powers to extend or modify regulation. The Paper also recommends that the FPC be allowed to make recommendations to the Bank of England in relation to the Bank's regulation of systemically important infrastructure, including payment and settlement systems.
It is proposed that the recommendations made by the FPC will be made on a "comply or explain" basis, meaning that the recipient of the recommendation, whether that be HM Treasury or the PRA, will be required to comply with it, or else face having to explain the reasons for their non-compliance to the FPC and the public.
Comments on this Consultation Paper are welcome until 11 December.