A new approach to financial regulation: judgement, focus and stability1
18/10/2010

We are supportive of the broad structure of the new UK regulatory framework, including the adoption of a ‘twin peaks’ approach and the dedicated focus on macro-prudential analysis and action. But within this context we view the proposals set out in the Treasury consultation paper as insufficient in ensuring that appropriate checks and balances are built into the new arrangements.

We see the following as key considerations for the Government to consider in developing its proposals for the reform of the UK financial services regulatory framework:

• The question of how the financial stability objective fits with not only monetary policy, but also fiscal policy and the Government’s overall macroeconomic management of the economy and what this means for engagement on the part of the Treasury and Parliament.
• The adoption of a more judgement-based approach to prudential supervision, in which firms’ strategies and business models are questioned, and the greater emphasis this places on the need for deliberate due process on the part of the PRA and the accountability and transparency mechanisms under which it operates.
• The question of whether the broader consumer interest is necessarily represented by the regulator adopting an advocacy role as implied by the use of the term ‘consumer champion’ and the need for the CPMA to give equal weight to its responsibilities for retail and wholesale markets.
• The benefits of a strong, cohesive markets division within the CPMA capable of representing the UK interest in European and international discussions.
• Taking a longer term view which is in the national interest by mandating that the regulatory authorities are tasked with ensuring that the UK financial services marketplace remains internationally competitive.

Please read the full response via the link below.