Which? is concerned that the Prudential Regulation Authority’s power of veto over the Financial Conduct Authority will see banks’ own interests prioritised over their treatment of customers.
The latest Treasury consultation on financial regulation, published in February, said the Government will legislate for the PRA to be gran- ted a veto mechanism “to reduce the risk of regulatory actions threatening finan- cial stability or the disorderly failure of a firm”.
Speaking at a panel session on the FCA, held by The Financial Services Forum and Lansons Communications last week, Which? financial services chief advocate Doug Taylor said this power raised questions about the PRA’s ability to intervene in regulatory action taken by the FCA.
He said: “I recognise that the PRA wants to ensure there is market stability but does that mean if you are a company that is effectively too big to fail, you are too big to have to treat your customers fairly?”
Taylor explained that the PRA may exercise its veto power when it believes action being taken to protect consumers goes against the interests of individual companies. He added: “The FCA will fail if it becomes institutionalised as second class to the PRA. My worry is that this conflict between the PRA and the FCA is being swept under the carpet through this process. A light needs to be shone upon this.”
Conservative MP for Bury St Edmunds and Treasury select committee member David Ruffley, who also attended the panel session, said: “Why is it that the Government has seen fit to say the PRA will always have an override power over the FCA? This is a question for us to ponder.”