On July 26, the UK Treasury Committee published a review of reports (Report) into the failure of the UK banking group Halifax Bank of Scotland (HBOS). Notably, the Report includes a review of the enforcement functions of the UK Financial Services Authority (which was subsequently divided into the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA)) at the relevant time of HBOS’ collapse. and the Report concludes that a strong case exists to move those functions to a separate new enforcement body (as previously proposed in 2013 by the Parliamentary Commission on Banking Standards).
The Report notes the “conflicting objectives” and tension between the FCA’s supervisory and enforcement functions and that it is unsatisfactory for the FCA to retain enforcement functions over banks while having very limited prudential supervisory powers. It makes clear that the Treasury Committee is of the view that a separate enforcement body should sit equidistant between the FCA and the PRA. The Report suggests that a separate enforcement body would boost perceptions of independence and bring clarity to the objectives of all three regulators. It further confirms that the Treasury Committee will seek to appoint an independent reviewer to reassess the case for a separate enforcement body.
A copy of the Report is available here.