Building Societies Association
Feature
Costs analysis of new regulatory structure must consider mutuals, says HMT
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Contact: Rachel Wylie Date: 25 Feb 2011 |
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In its recent consultation on the new regulatory structure – A New Approach to Financial Regulation: Building a Stronger System - HM Treasury set out its latest thinking on regulatory reform.
Particularly welcome is the Government’s decision that both the Prudential Regulatory Authority (PRA) and Financial Conduct Authority (FCA) will need to take account of mutuals in relation to cost-benefit analyses. The consultation states "In order to ensure that a ‘level playing field’ operates across the financial system, the Government will modify the consultation requirements for both the PRA and FCA so that they must provide not only an analysis of the costs which will arise from a proposed rule, but also an analysis of the extent to which those costs (and benefits) affect mutually-owned institutions differently to other ownership models; this analysis will be undertaken alongside the usual cost-benefit analysis. This will serve to build up an impartial evidence base so as to assist the regulators, the public and Government in understanding whether the legislative framework continues to treat diverse financial business models appropriately."
Also of importance is that the new arrangements will recognise corporate diversity – “Creating a regulatory regime that supports different ownership models was set out in the Coalition agreement as a desired outcome, and this has informed the design of the new architecture”.
An area where BSA concerns remain is on the labelling of the FCA as a “consumer champion”. We believe that it’s inappropriate for a conduct of business regulator to be a consumer champion. A rule-making and rule-enforcing body cannot have the impartiality essential for the task, while at the same time being a “champion” of one half of the interested parties.
This is not to say that we do not see a role for consumer champions. Many independent bodies fulfill this role, and it is an important role for the media. These bodies are legitimately counterbalanced by trade associations and the FSA Practitioner Panels.
The full HMT consultation can be viewed at the link below -
