COMMONS

New Inquiry into Financial Regulation

28 July 2010

The Government has issued a consultation on its plans to change the system of UK financial regulation. The Committee today issues a call for evidence as part of its inquiry into these proposals.

Under the Government’s proposals, the Financial Services Authority (FSA) will cease to exist in its current form, and be replaced by two new bodies – the Prudential Regulation Authority (PRA), a new subsidiary of the Bank of England focusing on regulation of banks, deposit-takers  and insurers; and the Consumer Protection and Markets Authority (CPMA), with a special focus on consumer protection and market conduct. A new Financial Policy Committee (FPC) will be set up in charge of macro-prudential regulation. The FPC will be a committee of the Bank of England Court of Directors.

The Committee seeks written evidence on the Government’s proposals. Among the questions that the Committee may look at are:

Overall

  • Will the Government’s financial regulation proposals improve the framework for financial stability in the UK? Will they work in a crisis?
  • Do the Government’s proposals get the balance right between tackling the problems of the last crisis and preparing the UK financial system for the next one?
  • How do the Government’s proposals dovetail with initiatives currently being undertaken at European and the global level?
  • What costs will the regulatory structure place on consumers?

Power, roles and responsibilities

  • Do the Government’s proposals appropriately assign roles and responsibilities between the different regulatory institutions?
  • Will there be unintended consequences of the Government’s proposals for regulation on the prospects for non–bank financial institutions;

The Financial Policy Committee (FPC)

  • Should the FPC have a statutory remit? If so, what should that remit be?
  • How should the success of the FPC, both in and out of crisis, be measured?
  • Given the international regulatory framework, what macro–prudential tools should be granted to the FPC?
  • Has enough been done to mitigate the risk of conflict between the FPC and the Monetary Policy Committee (MPC)? Is the FPC appropriately structured in terms of:

    The balance between internal and external members?
    The size of the Committee?
  • What characteristics, experience and qualities should the Government look for when appointing external members of the FPC?

The Prudential Regulation Authority (PRA)

  • Should the PRA be the lead authority over the Consumer Protection and Markets Authority (CPMA)?
  • Is it appropriate for the PRA (and CPMA) to adopt a judgements–based approach to financial regulation and supervision?

The Consumer Protection and Markets Authority (CPMA)

  • Do the reforms provide adequate protection for the consumer?
  • To what extent will the regulatory and administrative burden increase for those firms who now have to deal with two regulators?

Other issues

Should any of the proposed bodies be given responsibility for promoting competition in the banking and financial services sector?

Should any of the proposed bodies have a role in promoting the City of London?

The deadline for submissions is 12 noon on 22 September 2010.

NOTES ON SUBMISSION OF WRITTEN EVIDENCE
Written evidence should be in Word or rich text format—not PDF format—and sent by e-mail to treascom@parliament.uk The body of the e-mail must include a contact name, telephone number and postal address. The e-mail should also make clear who the submission is from. The deadline is 12 noon on Wednesday 22 September 2010. Submissions should be no longer than 3000 words. Submissions should be in the format of a self-contained memorandum. Paragraphs should be numbered for ease of reference, and the document must include an executive summary. Further guidance on the submission of evidence can be found at www.parliament.uk/parliamentary_committees/witness.cfm.

Submissions should be original work, not previously published or circulated elsewhere. Once submitted, your submission becomes the property of the Committee and no public use should be made of it unless you have first obtained permission from the Clerk of the Committee. Please bear in mind that Committees are not able to investigate individual cases.

The Committee normally, though not always, chooses to publish the written evidence it receives, either by printing the evidence, publishing it on the internet or by making it publicly available through the Parliamentary Archives. If there is any information you believe to be sensitive you should highlight it and explain what harm you believe would result from its disclosure; the Committee will take this into account in deciding whether to publish or further disclose the evidence.

For data protection purposes, it would be helpful if individuals wishing to submit written evidence send their contact details in a covering letter. You should be aware that there may be circumstances in which the House of Commons will be required to communicate information to third parties on request, in order to comply with its obligations under the Freedom of Information Act 2000.  

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