Following the general election we were told a new intake of backbench MPs would strive to do more than their predecessors to hold the powerful to account.
Emboldened by the expenses scandal and the need to “clean up” politics these fresh faces would act independently of their parties to truly represent their constituents’ interests.
In financial services, a good early example was the Parliamentary debate on the RDR when over 80 MPs from all sides turned up to express concern over the FSA’s proposals.
A running theme of the debate, and the MPs’ interviews which followed, was a sense of outrage over the regulator’s lack of Parliamentary accountability.
Although the political attention, and Treasury select committee report which followed, only led to limited RDR concessions from the FSA, MPs declared the current restructure of financial services regulation would be used to rein in the regulator.
The Financial Services Bill, which will create the new Financial Conduct Authority and Prudential Regulation Authority, is now at committee stage in Parliament.
But despite the early promises, there is a growing feeling that MPs will not only pass up this rare opportunity to increase Parliamentary scrutiny of financial regulation but also introduce new powers diminishing the levels of accountability which currently exist.
As Aviva points out in this week’s Money Marketing, current proposals would limit the power of the Upper Tribunal to overturn, on appeal, decisions made by the FCA in areas such as authorisation and general regulatory matters.
The Government says the change is needed so the new regulator’s “judgement-based” approach to regulation is not undermined.
However, the introduction of this new regulatory experiment, or “regulation by hunch” as Aifa chair Lord Deben describes it in this week’s Money Marketing, should be accompanied by more checks and balances, not less.
Another worrying development is a dilution of the powers of the various representative financial services panels – consumer, practitioner and small business- which are supposed to hold the regulator to account.
The Financial Services Practitioner Panel warns it will be undermined by current proposals to remove the requirement for the regulator to explain the rejection of any of its recommendations.
There is no point in these panels existing if the regulator is allowed to simply ignore their work.
As usual, Treasury select committee chairman Andrew Tyrie is leading the fight to try and keep the regulatory leviathan in check.
The TSC wants the power, on behalf of Parliament, to demand retrospective reviews of FCA activities and new rules to force the FCA to publish board minutes in a similar manner to the monetary policy committee.
However, the TSC’s cause is not helped by some of its members voting against, or at least not speaking up for, some of its accountability proposals in the public bill committee scrutinising the FS Bill.
Labour Shadow Treasury minister Chris Leslie, also part of the 20-strong public bill committee, has been attempting to add amendments to the bill to address accountability issues but has strangely found no support from Conservative members on the TSC.
For instance, Tory MPs and TSC members Mark Garnier and Jesse Norman both voted against a Labour amendment to force the Bank of England to replace its current court structure with a more substantive board, a proposal that had been initially suggested by the TSC.
Earlier this week, Leslie brandished a copy of Money Marketing during a committee meeting to remind Garnier of comments he made to us about the desirability of publishing FCA board minutes.
Leslie was arguing for an amendment to force the FCA to publish minutes and agendas from board meetings and important committees, unless inappropriate, and summarise the considerations taken into account when important policy decisions are made.
Treasury minister Mark Hoban said such move would be too prescriptive and, as the current FSA board appear happy with the principle of publishing minutes, no legislative change is required. Leslie rightly pointed out that regulators can change their minds and future regulators may have a different view but, sensing a lack of support from the committee, parked the amendment for now after Hoban agreed to look again at the measure.
This could be the last chance for many years to create a more accountable regulator but the signs do not look good. MPs appear more focused on party politics than trying to keep the new, more powerful, regulator in check.
Paul McMillan is the editor of Money Marketing – follow him on twitter here