The Treasury select committee says proposals for the Financial Conduct Authority to have a “plethora” of objectives risks confusion and should be reviewed.
The committee’s report into the Financial Services Bill as it stood at the end of its passage through the House of Commons, also warns that the FCA’s accountability mechanisms need improving.
The bill proposes giving the FCA the strategic objective of “ensuring that relevant markets function well” and three operational objectives of “securing an appropriate degree of consumer protection”, “promoting and enhancing the integrity of the UK financial system” and “to promote effective competition for the benefit of the consumer”.
The report says: “The Government’s original aim when framing the FCA’s objectives, was simplicity and clarity. There is a risk this will be lost in the plethora of strategic and operational objectives sitting alongside a number of duties and ’have regard’ requirements. Such a framework could cause confusion.”
The Government believes the strategic objective will focus the FCA’s regulatory culture, ensuring it does not pursue any single operational objective to the detriment of a properly functioning market.
The Treasury has already changed the proposed strategic objective from “protecting and enhancing confidence in the UK financial system” after the TSC said the wording could lead the regulator to maintain a “misplaced” confidence.
The report renews the committee’s calls for measures to improve the accountability of the FCA. It wants it to publish full minutes of its board meetings, to have a duty to provide information and carry out retrospective reviews requested by the committee and TSC preappointment hearings for those put forward for the role of FCA chief executive by the Treasury.
Last November, FSA chairman Lord Turner told the TSC he was “quite favourable” to the idea of the FCA publishing board minutes.
When the Government published the bill in January, it said the FCA’s governance should be “as transparent as possible and appropriate” but that the details should be a matter for the board.
In the bill’s committee stage, Treasury financial secretary Mark Hoban said he has “no objection” to saying the minutes should be published and he would “think about…whether there is a way of including the measure without setting a precedent on the degree of intervention in how boards function, which would be unhelpful.”
The report says: “It is widely argued that accountability mechanisms for the FSA have been seriously defective. Our recommendations therefore require statutory force.”