Hand financial services responsibilities to regulators, MPs say

An influential group of MPs has backed Government plans to transfer EU rules on financial services to UK regulators’ rule books.

The Treasury Select Committee said that most of what was adopted into British law from European legislation during the transition out of the bloc should be handed to regulators.

When the UK was a member of the EU, much of the country’s financial services regulation was based around Brussels.

After Brexit this responsibility has now shifted to Westminster. But moving some of the rules into the rule books followed by regulators such as the Financial Conduct Authority could avoid cumbersome processes for legislators, MPs said.

“Keeping rules in statute could require Parliament to amend or pass new legislation every time that the regulators wish to make changes to them. This would be resource-intensive and impractical,” the committee said.

“The regulators have a key role to play in designing and developing the rules with appropriate Parliamentary oversight.”

Regulators should also be given a free hand to suggest their own policies without first consulting the Treasury, the MPs said.

There is currently “significant interaction” between regulators and ministers well before regulators start consulting on new proposals.

But MPs said they had seen no compelling evidence for why ministers should see the full proposals before they are published for consultation. Doing so could damage regulatory independence, they added.

Committee chair Mel Stride said: “As the UK forges a new post-Brexit future, the Government’s approach to financial services regulation will be critical. It needs to get the balance right between effective scrutiny and ensuring that the regime is nimble and light touch where possible.”

He added: “Retaining the independence of our financial services regulators from political interference is essential to ensuring the UK remains a world-leading financial centre.”

The Treasury said: “We are determined to ensure the UK remains one of the pre-eminent financial centres now we have left the EU, and as part of that we are making sure the regulation of the sector works in the interests of UK firms, markets and consumers by reviewing the regulatory framework.

“We are considering all responses to our first consultation ahead of a second consultation in the autumn. We welcome the committee’s report and will carefully consider their recommendations.”