Submission to UK government on FCA and PRA reporting requirements in the Financial Services and Markets Bill

Abstract

HM Treasury published a Call for Proposals in May 2023 seeking feedback on the FCA and PRA reporting requirements contained in Clause 37 of the UK Financial Services and Markets Bill. This clause, now enacted as section 39 of the Financial Services and Markets Act 2023, allows the UK government to direct the FCA and PRA to publish requested information in order to review how the regulators are discharging their functions. For example, the Treasury could request information on performance metrics (e.g., average processing time for different regulatory approvals) to evaluate the regulators' advancement of the new statutory growth and competitenvess objectives.

My policy submission to the UK government contains two key recommendations:

1. The Treasury’s information direction powers in Clause 37 are broadly appropriate, because relevant growth and competitiveness reporting metrics require continual change. However, key metrics alone will be ineffective without contextualised explanation. Additionally, Clause 37 mitigates the risks of misaligned rule-making incentives between government and the regulators, as well as the potential for legitimacy erosion as the regulators exercise ever greater powers.

2. The Clause 37 amendments to subparagraphs 11A(4) and 21A(4) of FSMA 2000 Schedule 1ZA and Schedule 1ZB are ambiguously drafted. They should be amended for clarity and require the FCA and PRA to provide reasons when declining to publish information in the public interest. Doing so would increase the regulators' accountability and better enable judicial review.

Keywords: FSM Bill; Financial Services and Markets Act 2023; Accountability; Financial Conduct Authority; Prudential Regulation Authority

JEL Classification: K20, K22, G18