Treasury select committee chairman Andrew Tyrie has warned that the new Financial Conduct Authority will stifle competition and increase firms’ regulatory costs.
The Government plans to split the FSA into the Prudential Regulation Authority and the Financial Conduct Authority in 2013.
Last month, the FSA warned the financial services industry will have to bear the brunt of higher regulatory costs as the FCA pursues a more interventionist style.
FSA chief executive Hector Sants said the FCA’s supervisory work will cost £200m a year more than the FSA’s 2010/11 budget of £454.7m.
Speaking to the Financial Times, Tyrie (pictured) says: “I am concerned that we are going down a route which in the long run will stifle competition and add to costs.
“We should use the opportunity created with fresh legislation to examine how we can get the best value for money for regulation and make sure there are pressures to cut away otiose regulation rather than a one-way ratchet.”
The TSC’s report into competition and choice in the banking sector, published in April, called on the FCA to treat competition as a primary consideration.
The Government’s draft legislation, published this month, gives the FCA a duty to promote competition so far as it is compatible with its main objectives, which include facilitating efficiency and choice in the market.
The TSC said it will continue to push for the FCA to have a primary duty to promote effective competition.