People in the UK’s financial sector are wondering if the new Prime Minister will change the regulatory landscape.
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With Liz Truss becoming Britain’s new Prime Minister on Tuesday, questions are being raised about her plans for the UK’s historic financial district, the City of London, as the country faces a worsening crisis in the cost of living and the ongoing conflict in Ukraine.
According to the TBEN, the city’s regulators could face a major uproar under Truss last month. It quoted campaign insiders as saying Truss would seek to review and potentially merge London’s three major regulators – the Financial Conduct Authority (FCA), the Prudential Regulation Authority (PRA) and the Payment Services Regulator (PSR).
She has also suggested that the Bank of England’s mandate will be reviewed during her time as prime minister.
‘Change for the sake of change’
The FCA regulates 50,000 companies in the UK to “ensure our financial markets are fair, competitive and fair,” according to its website. The PRA, meanwhile, oversees the work of approximately 1,500 financial institutions, to “ensure that the financial services and products we all rely on can be delivered in a safe and sound manner.”
Their duties are similar, but the various organizations were formed when it was decided that the Financial Services Authority, which regulated the city between 2001 and 2013, had multiple functions that could be better served through separate organizations.
According to Matthew Nunan, a partner at law firm Gibson Dunn and a former chief of department at the FCA, the original authority’s primary goals were good conduct and financial soundness across the industry. He said splitting in half was seen as a way to give those goals equal priority.
“The simple question that needs to be answered now is: what would the re-engagement of the PRA and FCA bring about?” Nunan wrote in an email to TBEN.
“If the answer is reforming the old Financial Services Authority, what was the question? Or is it just changing for the sake of change?”
Governments must always “challenge the status quo,” Nunan said, but he argued the question is whether this would really better meet the “changing needs of a nation.”
“The problem here is that instead of articulating a problem and seeking evidence, the statements made seem to provide answers to questions no one is asking,” he said.
Nunan also emphasized the difference between regulators and politicians, saying that regulators “would never be allowed” to make proposals as Truss has done.
“Regulators are required by law to make fact-based decisions about rule changes [and] cost-benefit analysis before they can be implemented… If that’s true for regulators, why not politicians?” he asked.
‘Light touch regulatory regime’
The “battle” to deregulate the banking sector is like “turning back the clock to the pre-2008 global financial crash,” Fran Boait, director of the Positive Money campaign group, told TBEN’s “Squawk Box Europe” last month.
There is a risk that the country will find itself in the same situation “or much worse,” Boait said.
“Liz Truss’ proposal to merge the three main city watchdogs would risk recreating that light regulatory regime – the regime we had before the crash,” she said.
She also emphasized that it has been less than a decade since the organizations were originally established.
“It hasn’t been that long since we set up a much larger regulatory system because there was a consensus that there is so much risk in the system, [that] complexity in the financial sector needs to be properly regulated,” she said.
‘Lack of clarity’
Discussions of a review or merger of any of London’s regulators remain speculation, as Truss has yet to make any official statements on the subject.
That does create “ambiguity” about the future status of the three regulators, according to Hargreaves Lansdown analyst Susannah Streeter.
She said improving financial services for customers should be at the forefront of all regulatory discussions.
“Whether they remain as separate or merged entities, it is very important that the UK has dynamic regulators that make the most of Brexit freedoms,” Streeter said in an email to TBEN.
Tackling scams, giving investors more opportunities to invest in IPOs and tackling the way information is disclosed to potential investors should all be on the agenda for any proposed changes to the current regulatory system, she added. ready.