Today, HM Treasury published its latest consultation paper on the Government's sweeping reforms to the UK financial services regulatory architecture. The paper contains details of the remit, statutory objectives, powers, approach and coordination of the new regulators.
Despite concerns expressed by the House of Commons Treasury Select Committee regarding the Government's ambitious timetable for reform, the Government remains committed to implementing the new architecture by the end of 2012. Stakeholders have only eight weeks to respond to this consultation which closes on 14 April.
It is plain from the consultation that efficient and effective coordination between the proposed new authorities will be critical to eliminate the possibility of regulatory duplication, underlap, and conflicting regulatory stances. The proposals for coordination between the new authorities in respect of regulatory processes are complex - those relating to authorisation and approval of controlled functions seem particularly cumbersome - and could potentially create some risk of regulatory arbitrage.
Although commentators have focused on proposed new powers to ban products or prohibit financial promotions, most of these outcomes could have been achieved under existing statutory powers currently available to the FSA. By contrast, the proposal that publication of details of the commencement of enforcement proceedings - potentially damaging reputations and careers before the allegations made by investigators are fully tested by the regulator's internal decision makers (let alone an independent tribunal) - is likely to raise concerns, and could ultimately prove counterproductive, if it created greater incentives for firms to challenge the regulator's decisions.
Click here for a summary of the Government's proposals.
Click here for a diagram of the new supervisory framework.
Click here for the consultation questions.
- 4 April - FSA's new shadow structure, replacing risk and supervision units with a prudential business unit and consumer and markets business unit, begins to operate.
- 14 April – consultation period ends. HM Treasury will carry out roundtable discussions and seminars throughout and after consultation period.
- White Paper and draft Bill to be published - Bill will amend, and not repeal, Financial Services and Markets Act 2000.
- FSA and Bank of England to publish more detail on transition to PRA.
- Government to consult on new Economic Crime Agency.
- Bill to be presented to Parliament.
- Bill to receive Royal assent.
By end of 2012
- Full implementation of new regulatory architecture.