A lack of depth in the Treasury’s understanding of financial services could undermine its role of holding the new regulator to account, according to Cicero Consulting director Iain Anderson.
Speaking at the Reform conference on regulatory reform this morning, Anderson said the quality of the Treasury’s oversight is vital in ensuring the reforms are successful.
He said: “A very senior former Treasury mandarin expressed concerns to me recently about the lack of depth in financial sector understanding at an official level. The Treasury needs to know the right questions to ask if it is going to hold the regulators to account.”
Treasury financial secretary Mark Hoban, speaking at same event, said making sure regulators are independent gives them credibility.
He said: “Independent and depoliticised regulators carry great authority and strength in markets. We see this particularly with the Monetary Policy Committee. It was one of the key reforms of the last government to give the Bank of England independence, but of course they set a framework to set inflation targets at 2 per cent.”
The Treasury is currently consulting on oversight arrangements for the Prudential Regulation Authority and the Consumer Protection and Markets Authority, but both will have to lay annual reports before parliament and appear before the Treasury select committee, among a number of other possible accountability mechanisms.
The Financial Policy Committee in the Bank of England, which will have responsibility for macro economic stability, will include one non-voting Treasury representative, provide six-monthly reports and appear before the TSC.
Concerns about a “democratic deficit” in different areas of the regulatory structure have been raised by a range of organisations during the Treasury select committee’s inquiry into the proposed changes.
Hoban said increased transparency will encourage accountability and added that parliament will set the boundaries in which regulators operate.
Anderson said: “In this whole reform agenda, there is a really important question to ask: does the Treasury have the right governance structure in place?”