The regulators will be given new powers under Government proposals – but will lose some of their independence.
Regulators will be required to consider how the UK’s financial sector can grow and compete internationally when setting out rules that could crack down on bad practices.
The Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) will be given new powers to set rules as the UK moves away from the EU framework after Brexit according to Government proposals.
“The plans would require the FCA and the PRA to consider both the implications for growth and international competitiveness of their regulations, as well as their existing objectives of maintaining market integrity, consumer protection and a sound financial system,” the Treasury said on Tuesday.
In a consultation document, the Government said that it plans to keep the FCA and PRA as separate entities, and supports reforms that were brought in to the Bank of England, including the creation of its Financial Policy Committee.
It cited an IMF study which claimed that “when independent regulators make judgments on the design of regulatory standards, they are likely to deliver more predictable and stable regulatory approaches over time.”
Yet the consultation also includes plans that would reign in some of the regulators’ independence by giving Parliament and the Treasury “strengthened scrutiny and oversight over the FCA and PRA, appropriate to the increased rule-making powers received by the regulators.”
After Brexit, EU regulations had been transferred into the UK rulebook. However, the Government has now proposed to leave it to the regulators to decide how to replace these rules.
The process will probably take several years, the paper added.
Chancellor of the Exchequer Rishi Sunak said: “Earlier in the year, I set out my vision for an open, green, and technologically advanced financial services sector that is globally competitive and acts in the interests of communities and citizens across the UK, creating jobs, supporting businesses and powering growth across the UK.
“One important part of that vision is ensuring, as an independent nation, that we have a coherent, agile and internationally respected approach to financial services regulation that is right for the UK.
“Today’s proposals will support the future strength of the UK as a global financial centre, ensuring an agile and dynamic approach to regulation that supports the growth of the UK economy, without diverging from our continued commitment to high international standards.”