September 30, 2022
Britain’s new prime minister could rock the city of London

Those in the UK financial sector are wondering whether the new prime minister will change the regulatory landscape.

Jeff J Mitchell / Staff / Getty Images

As Liz Truss becomes Britain’s new prime minister on Tuesday, her plans for Britain’s historic financial district – the City of London – are being questioned as the country faces a living crisis and ongoing conflict in Ukraine. .

City regulators may face major setbacks under truss, according to the Financial Times last month. It cited campaign insiders as saying that the truss would seek to review and possibly merge three of London’s biggest regulators – the Financial Conduct Authority (FCA), the Prudential Regulation Authority (PRA) and the Payment Services Regulator (PSR).

He has also suggested that the mandate of the Bank of England be reviewed during his tenure as Prime Minister.

‘Change for Change’

The FCA regulates 50,000 firms in the UK to “ensure that our financial markets are honest, competitive and fair,” according to its website. Meanwhile, the PRA oversees the work of approximately 1,500 financial institutions “to ensure that the financial services and products we all rely on can be provided in a secure and robust manner.”

Their remittances sound similar, but different organizations were formed when it was decided that the Financial Services Authority, which regulated the city between 2001 and 2013, had many functions that could be better managed through separate organizations. could be served.

According to Matthew Nunan, partner at law firm Gibson Dunn and former department head of FCA, the original authority’s main goals were good conduct and financial soundness across the region. He said splitting it in two was seen as a way to give equal priority to those goals.

Noonan wrote in an email to CNBC, “Now the simple question has to be answered: what will happen with the PRA and FCA reuniting?”

“If the answer is a reform of the old Financial Services Authority, what was the question? Or is it just change for the sake of change?”

Governments should always “challenge the status quo”, Noonan said, but argued it was a question of whether it would actually better meet the “changing needs of a nation”.

“The point here is that instead of expressing a problem and asking for evidence, the statements made offer answers to questions that no one is asking,” he said.

Noonan also highlighted the differences between regulators and politicians, saying that regulators would “never be allowed” to make truss-like proposals.

Regulators are required by law to make evidence-based decisions on rule changes [and] They require a cost benefit analysis before they can be implemented… If this is true for regulators, why is it not true for politicians?” He asked.

‘Light Touch Regulatory Regime’

As Fran Boet, director of campaign group Positive Money, told CNBC’s “Squawk Box Europe” last month, the “battle” to deregulate the banking sector is like the pre-2008 global financial crash.

Campaign group says talks about deregulation of UK financial sector are 'very worrying'

It “puts the country at risk of falling into the same situation” or much worse, Boate said.

“Liz Truss’s proposal to merge three major city watchdogs would risk recreating that light touch regulatory regime – the regime we had pre-crash,” she said.

He also highlighted that it has been less than a decade since the organizations were originally established.

“It was not long ago that we set up a very large regulatory system because there was a general consensus that there was so much risk in the system, [that] Complexity in the financial sector needs to be properly regulated,” she said.

‘lack of clarity’

Discussion of any London regulatory body review or merger remains speculation, as the Truss has yet to make an official statement on the subject.

According to Hargreaves Lansdowne analyst Susanna Streeter, this causes a “lack of clarity” on the future status of the three regulators.

She said improving financial services for customers should be at the forefront of any regulatory discussion.

“Whether they remain as single or merged entities, it is really important that the UK has dynamic regulators that make the most of Brexit independence,” Streeter said in an email to CNBC.

He added that tackling scams, giving investors more opportunities to invest in IPOs and how to disclose information to potential investors should all be on the agenda of any proposed changes to the existing regulation system.

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