Coalition under fire over City regulation

PRESSURE is mounting on the government to rethink the details of its plans to transform the financial regulatory structure in the UK, which senior bankers have warned could close off avenues for discussion between regulators and the industry.

Of particular concern to the banks is the new Prudential Regulation Authority (PRA), which will answer only to the Bank of England and will not be required to hold an annual meeting or host regular consultation sessions with leading members of the industry.

“It is very noticeable that the necessary consultation between the PRA and others is not there when it comes to rule changes,” one source said yesterday.

Others warned that the second new regulatory body, the Consumer Protection and Markets Authority (CPMA), does not go far enough in acknowledging the importance of a coherent system of market regulation, despite it broadly replicating current practices in terms of consulting with the industry.

Angela Knight, chief executive of the British Bankers’ Association, said: “It’s clear that further work needs to be done on both the openness of the PRA and on recognition by the CPMA of the importance of regulating the UK markets, which are some of the deepest and most liquid in the world.”

Chancellor George Osborne revealed the sweeping plans for regulatory change in June, abolishing the tripartite system and handing Bank of England governor Mervyn King responsibility for maintaining the overall stability of the financial system. Hector Sants, who had said he would step down as Financial Services Authority chief executive, will now assume the top job at the PRA.