In its first public recommendation, the commission – headed by former Office of Fair Trading boss Sir John Vickers – called on the government to ensure that the new Consumer Protection and Markets Authority (CPMA) should have “a primary duty to promote effective competition”. It said encouraging active competition was essential to “a robust and stable banking sector”.
The commission broke its silence to issue the recommendation as part of the Treasury’s consultation on its proposed changes to financial regulation, which will involve splitting up the existing Financial Services Authority and handing responsibility for the stability of the banking system to a beefed-up Bank of England.
A new Prudential Regulatory Authority (PRA), operating as a subsidiary of the Bank, will replace the FSA when it is broken up, while the CPMA will be tasked with the protection of consumers and the day-to-day policing of financial firms.
The proposals have prompted concerns in the City, not least over whether the new structure – where responsibilities are spread between four authorities, the Bank, the PRA, the CMPA and the Treasury – will face even more communication problems than the existing tripartite system.
The ICB last month began its review into the banking sector, focusing on the amount of competition in the retail banking sector and the prospect of splitting up banks’ investment and retail operations. Its recommendations are due next autumn.