MPs have warned the UK government against putting “undue pressure” on regulators to “inappropriately undermine” standards for banks, insurers and other financial services firms.
The Treasury selection committee’s call is an indication of its concern about the risks of a post-Brexit transition to relevant financial regulation. It happens as regulators continue the lengthy process of converting or adapting EU rules into UK law.
“We will remain vigilant against any evidence that regulators are under undue pressure from the Treasury Department to inappropriately weaken regulatory standards,” the party-led committee said. Conservatives dominate said in a report on Thursday.
The report, addressed to the Treasury, Prudential Regulatory Authority and Financial Conduct Authority, adds that the department should “respect regulatory independence”.
Freeing the UK from the burden of complicated EU regulations has been a long-term goal for many Brexiteers. Prime Minister Boris Johnson recently proposed that lending standards be relaxed so that millions of housing beneficiaries could use their pension money as income to qualify for mortgages.
UK regulators have promised to make financial rules more pragmatic without diluting their essence.
Treasury and regulators have clashed over a number of issues, including plans for an overhaul insurance capital rulecalled Solvency II, aims to make it easier for insurers to invest in infrastructure.
Committee Chairman Mel Stride said: “The financial services sector is at a turning point, with regulators taking over new powers after the UK leaves the EU. “There are likely to be real opportunities to ease the regulatory burden without weakening standards,” he added.
The selection committee also forewarned the government’s plan to implement competing capability The secondary goal of managers, arguing that the secondary goal should be “promoting long-term economic growth”.
Words will matter: pursuing international competitiveness in the short term is unlikely to lead to economic growth or international competitiveness in the long term if it is achieved by weakening standards. strong UK regulation,” the committee added.
Other recommendations of the report include a call for the FCA to promote financial inclusion by looking at “the impact on people who may be prevented from accessing financial services by [new rules] or who may find themselves accessing services with lower terms. It has urged the FCA to publish an annual report on the matter.
The commission also recommended that the FCA allow companies to “experiment” more with financial services products if they set aside a rainy day fund to compensate customers if the products do not deliver the promised benefits. “This approach would not be risky, but it is an example of the kind of bold approach the FCA should be prepared to consider,” it added.
Recommendations for PRA include examining whether it could reduce the competitive advantage enjoyed by large banks and insurers due to their size. Such firms can use financial models to reduce their capital requirements, because they have enough data to provide sophisticated models that predict how loans and contracts will perform. Smaller firms do not have more data, so their models are less reliable, and therefore they must hold more capital.
Treasury, FCA and PRA have two months to respond to the selection committee’s recommendations.
