The Treasury Select Committee has published written evidence submitted in its financial regulation inquiry which shows the concern of many industry practitioners, as well as of the FSA itself, at the regulators’ reforms. The Government has indicated that a second consultation paper will be published in February 2011, but in the meantime further details of the proposals have emerged in a number of Ministerial statements.

The concerns voiced in the evidence to the Treasury Committee include:

  1. Concerns at the potential duplication of the roles of the Prudential Regulation Authority (PRA) and the Consumer Protection and Markets Authority (CPMA), and the practicalities of how these bodies will interact  
  2. Questions have been asked as to whether the PRA and the CPMA should have equal status or should the PRA be the senior regulator  
  3. The proposal that the PRA will not be subject to statutory processes, including wider consultation, when making rules  
  4. Questions have been raised as to how exactly the new regime and the European supervisory authorities (ESAs) will interact given that the responsibilities of the new UK regulators vary considerably compared with those of the ESAs  

For a copy of the written evidence click here.  

The FSA’s evidence gives their views of the risks and opportunities posed by the new structure, including by the transitional arrangements. The FSA intends to move to a “shadow split” early in 2011, reflecting the proposed mandates of the PRA and the CPMA. The position of Chief Executive of the CPMA has already been advertised. At the high level, the principal challenges to successful execution are:

  • People retention risk  
  • De-merger process: ie matching approximately 4,000 staff to new roles
  • Personnel stretch  
  • Continuity of the regulatory interface with firms  
  • Requirement for new supervisory processes  

For a copy of the memorandum click here.  

Comment

The Government announced in the Treasury’s Business Plan that the new regime would be fully in place by December 2012. RPC commented in August and October that the FSA was already struggling to cope with staff departures and waiting times for authorisations are on the up. Read our press releases here and here.

The need for double authorisation for the PRA and the CPMA could make the process of establishing a financial services firm even more cumbersome. Going forward, we wonder how the CPMA plans to reconcile its role as regulator and its expressed intention to be a ‘consumer champion’.