On 24 March, HM Treasury issued a press release announcing the publication of the remit and recommendations letters for the Financial Conduct Authority ("FCA") and Prudential Regulation Committee ("PRC").
The update notes that the UK is aiming to ensure that “every financial decision takes climate change into account” ahead of the UN Climate Change Conference (COP26) in Glasgow later this year.
As such, the update's primary focus is upon the UK's financial regulators' need to have regard to the government’s legally binding commitment to achieving a "Net Zero" economy by 2050 when discharging their duties and advancing their objectives, such as the supervision of UK authorised financial services firms.
The Treasury is required under the Financial Services and Markets Act 2000 and the Bank of England Act 1998 to make recommendations at least once a Parliament about the matters the FCA and PRC must have regard to when discharging their functions. The PRC is responsible for the exercise of the Bank of England’s functions as the Prudential Regulation Authority ("PRA").
The key matters about aspects of the government’s economic policy that the letters note the regulators should have regard and take into consideration "where relevant and practical" include:
- Ensuring greater competition in the financial services industry;
- Encouraging growth across financial services markets to boost the UK economy;
- Ensuring the UK remains competitive and "an attractive domicile for internationally active financial institutions" and that London retains "its position as the leading international financial centre and hub for green finance";
- Continuing innovation and initiatives that maintain "the UK as a leader in the use of technology";
- Encouraging "trade and inward investment to the UK";
- That financial services work "work in the best interests of the consumers and businesses they serve"; and
- On climate change, the the regulators should have regard to the government's commitment to achieving a Net Zero economy under the Climate Change Act 2008 (Order 2019) when considering how to advance their objectives and discharge their functions.
Building on their existing body of climate change-related work, the Financial Conduct Authority (FCA) and Prudential Regulation Committee (PRC), which supervise financial services firms, should now take into account the Government’s legally binding commitment to transition to a net zero economy by 2050, following a letter from the Chancellor updating their respective remits today.