Proposals for the Financial Conduct Authority to have a “plethora” of objectives risk confusion and should be reviewed, say the Treasury select committee.
The committee’s report into the Financial Services Bill warns the FCA’s accountability mechanisms need improving and suggests the new regulator should carry out reviews of the costs and benefits of regulation.
The bill, currently at the start of its way through the House of Lords, 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 TSC report says: “The Government’s original aim when framing the FCA’s objectives, was simplicity and clarity. There is a risk that 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 FCA’s strategic objective will focus its regulatory culture and ensure it does not pursue any single operational objective to the detriment of a properly functioning market.
The report also renews the committee’s calls for measures to be put in place to improve the accountability of the FCA. The committee 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 pre-appointment hearings of those put forward for the role of FCA chief executive by the Treasury.
The report says: “It is widely argued that accountability mechanisms for the FSA have been seriously defective. Our recommendations therefore require statutory force.”
The report comes before the bill is debated for the first time in the House of Lords on Monday.