The Prudential Regulation Authority and the Financial Conduct Authority will make increased use of powers to commission expensive skilled persons reports.
Skilled persons reports, also known as section 166 reports, check for weaknesses or failings in a firm’s practices and cover areas such as compliance, fraud, products and capital adequacy.
The FSA’s use of section 166 reports has been widely criticised because the costs, which can be hundreds of thousands of pounds, are borne by the firm rather than the regulator.
The FSA and the Bank of England today published a document detailing how the PRA will supervise financial services firms.
The PRA document says: “To assist with its risk assessment, the PRA will at times use its statutory powers – in particular its information-gathering power and its powers to commission reports by skilled persons on specific areas of interest.
“Such reports might cover verifications of regulatory returns or…the forensic analysis required to verify resolution plans.
“The PRA will be able to enter into contracts with skilled persons directly, and will follow a transparent and consistent approach to selecting and appointing them.
“The PRA will continue to make increased use of section 166 reports as a supervisory tool.”
The FCA approach document also confirms the regulator will make greater use of section 166 powers.