The Treasury select committee has warned the Government not to rush the development of legislation for the new regulatory architecture to avoid creating flawed regulation.
Last week, in its report on reforming financial regulation, the select committee raised concerns about the risks of proceeding with “undue haste”.
The Government says it wants to introduce legislation for the structure in mid-2011 to minimise uncertainty for regulated firms but the committee says making sure reforms are well thought through is more important.
The report says: “The aim of introducing legislation in mid-2011 appears optimistic and, if pursued too rigidly, runs the risk of compromising its quality.”
Select committee chairman Andrew Tyrie says: “It is vital to maintain the momentum for reform, but there is no point in flawed change. In any case, these proposals need to be considered in conjunction with the Independent Commission on Banking.”
The ICB was set up by the Government to look at structural reform of the banking industry and is due to report in September 2011, after the Government plans to publish a bill on the switch to the twin peaks system.
The select committee report says the outcomes of the commission may well have an impact on the shape of reg- ulation needed and that “full regard” should be given to its proposals.
It says: “The legislation to establish the new regulatory structure should be subject to pre-legislative scrutiny, over a reasonable timescale.
“Once introduced, the timetable for the bill should be generous enough to allow proper Parliamentary con- sideration.”