In its response to the HM Treasury consultation paper on reforming financial regulation, the BSA said there was “much to welcome” in the proposals, but warned that the new regime needs proper accountability and tough cost control.
The BSA said robust checks and balances must be put in place to govern the Bank, given the concentration of power within one organisation would mean only a few people would need to make wrong decisions for a future financial crisis to be handled badly.
It highlighted that under the proposed new regulatory arrangements, the governor of the Bank of England will preside over not only the Monetary Policy Committee (MPC), but all three new regulators – the Financial Conduct Authority (FCA), Prudential Regulatory Authority (PRA) and Financial Policy Committee (FPC) – and have oversight of the bank resolution regime.
It also noted that the concentration of so many powers within the Bank could fracture its focus.
Adrian Coles, director-general of the BSA, said: “We do have some concerns about the emergence of an excessively powerful Bank of England. We believe that it is time to strengthen the resources of the Treasury Select Committee to provide a measure of balance.”
The BSA argued that the Bank’s proposed power would warrant a dedicated Select Committee to oversee it.
In addition, the BSA said that there must be tougher action on cost control, pointing out that the Treasury’s commitments to efficiency and cost effectiveness have not been translated into detailed, practical arrangements.
The BSA offered its own proposals for this, including shared back offices and common gateways for such things as firms’ authorisations and approvals.
Nevertheless, the BSA welcomed the new strategic and operational objectives of the FCA, PRA and FPC, particularly efficiency, value for money and cost-effectiveness.
In addition, it highlighted the Treasury’s recognition of the need for corporate diversity, the commitment for strong co-ordination between the regulators, and the recognition that it is crucial for the regulators to be involved with and co-ordinate their activities with the EU and international bodies.
Coles said: “Broadly speaking, there is much to welcome about these more detailed proposals for the new regulatory regime. We are pleased to note the degree to which the new arrangements will recognise corporate diversity, which will help to ensure a level playing field for businesses of different corporate forms under the new regulator.”
To read the BSA’s full response, click here.
