MPs scrutinise regulation

The Treasury Select Committee has announced an inquiry into proposed changes to financial regulation.

Under the Government's proposals, the Financial Services Authority (FSA) will cease to exist in its current form, and be replaced by two new bodies

• the Prudential Regulation Authority (PRA), a new subsidiary of the Bank of England focusing on regulation of banks, deposit-takers and insurers
• the Consumer Protection and Markets Authority (CPMA), with a special focus on consumer protection and market conduct.

A new Financial Policy Committee (FPC) will be set up in charge of macro-prudential regulation. The FPC will be a committee of the Bank of England Court of Directors.

The Committee seeks written evidence on the Government's proposals. Among the questions that the Committee may look at are:

Overall

• Will the Government's financial regulation proposals improve the framework for financial stability in the UK? Will they work in a crisis?
• Do the Government's proposals get the balance right between tackling the problems of the last crisis and preparing the UK financial system for the next one?
• How do the Government's proposals dovetail with initiatives currently being undertaken at European and the global level?
• What costs will the regulatory structure place on consumers?

Power, roles and responsibilities

• Do the Government's proposals appropriately assign roles and responsibilities between the different regulatory institutions?
• Will there be unintended consequences of the Government's proposals for regulation on the prospects for non-bank financial institutions; The Financial Policy Committee (FPC)
• Should the FPC have a statutory remit? If so, what should that remit be?
• How should the success of the FPC, both in and out of crisis, be measured?
• Given the international regulatory framework, what macro-prudential tools should be granted to the FPC?
• Has enough been done to mitigate the risk of conflict between the FPC and the Monetary Policy Committee (MPC)? Is the FPC appropriately structured in terms of: -The balance between internal and external members -The size of the Committee?
• What characteristics, experience and qualities should the Government look for when appointing external members of the FPC?

The Prudential Regulation Authority (PRA)

• Should the PRA be the lead authority over the Consumer Protection and Markets Authority (CPMA)?
• Is it appropriate for the PRA (and CPMA) to adopt a judgements-based approach to financial regulation and supervision?

The Consumer Protection and Markets Authority (CPMA)

• Do the reforms provide adequate protection for the consumer?
• To what extent will the regulatory and administrative burden increase for those firms who now have to deal with two regulators?

Other issues

• Should any of the proposed bodies be given responsibility for promoting competition in the banking and financial services sector?
• Should any of the proposed bodies have a role in promoting the City of London?

The deadline for submissions is 12 noon on 22 September 2010. Details of how to submit are available on the Committee's web site.