Tory leader Liz Truss is considering plans to merge three of the City’s key financial regulators, according to reports.
The Financial Conduct Authority, the Prudential Regulation Authority and the Payment Systems Regulator could all be merged into one organisation, the Financial Timeswriteciting insiders from the campaign.
The trio’s roles and responsibilities would be immediately revised if Truss triumphs over rival Rishi Sunak, the newspaper reports.
In his bid to become the next prime minister, Truss has gone on the offensive against City regulators, claiming their caution has held back economic growth. He singled out the Bank of England for not being able to control inflation.
He has also criticized Whitehall officials involved in regulatory and economic policy for following a bureaucratic “orthodoxy” that has failed.
The FCA is responsible for regulating conduct in the UK, ensuring that financial services professionals comply with rules on everything from insider trading and financial crime to charge disclosure and suitability of counseling It has around 4,000 staff overseeing around 60,000 businesses, ranging from asset managers and pension providers to financial advisers, mortgage lenders and claims handlers.
The PSR, which is responsible for overseeing e-money services such as Bacs and Chaps, sits within the FCA but has its own board and management team, leading a team of around 130 staff.
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The PRA’s 1,250 staff are based at the Bank of England and are tasked with ensuring the stability of the financial system as a whole, focusing on issues such as capital buffers and systemic risks at major banks and insurers .
Although the Treasury approves senior board appointments, all three were set up to be independent of government and are funded by fees from the companies they regulate.
The government is already on track for greater oversight of regulators through its Financial Markets and Services Bill introduced last month. The legislation is created to give regulators secondary goals to drive economic growth. It will give the government the power to introduce new areas of regulation, call for rules to be revised and influence how regulators set up their cost-benefit analysis frameworks.
If the legislation is passed in its current form, regulators will have to consult the Treasury on changes that could affect the government’s work with foreign jurisdictions and notify MPs on the Treasury Committee when they publish any consultation.
Truss’s potential plan to merge regulators could focus conflicts between competing objectives.
Fears have already been raised that forcing regulators to focus on growth, not stability, could trigger another financial crisis. But the PRA has also sounded a more defensive note than the FCA in the face of any perceived threat to its independence.
Governor Andrew Bailey has warned that the City’s position depends on independent regulation, while Deputy Governor Sam Woods has urged the government not to offer insurers a “free lunch” as it seeks to loosen Solvency rules II.
FCA chief Nikhil Rathi said before taking up the role that he had “never been a big personal fan” of having a growth and competitiveness objective, and that it was not “fundamentally necessary to have a strong financial sector, successful and dynamic”. .”
The FCA has since said it supports a secondary goal of growth and competitiveness.
“No decisions have been made on the future of the regulators. Liz will examine their role as part of a review. It is clear to her that there has not been enough focus on economic growth,” an official told the FT.
Financial News approached the PRA for comment. The FCA declined to comment to FN.
Previously, prudential conduct and regulation had sat within the same organisation, the Financial Services Authority, but former chancellor George Osborne in 2013 former chancellor George Osborne split it into separate entities after of perceived deficiencies to mitigate the financial crisis.
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