City regulator faces grilling on Treasury’s growth agenda
The Financial Conduct Authority (FCA) was grilled by the Treasury Committee on Tuesday after it unveiled its new five-year strategy.
Members of the committee questioned the gap between the government’s growth agenda and how the FCA was prepared to deregulate.
Chair of the Treasury Committee Dame Meg Hillier, said the regulator’s structure led to it being “pulled in all directions”.
However, the regulator’s chief executive Nikhil Rathi contested: “The structure of regulation is a matter for Parliament.”
Writing for City AM on Tuesday, Rathi said growth would become one of the regulator’s key priorities as part of the new plan.
MPs questioned the FCA on the Treasury’s claim they can cut administrative costs for businesses by 25 per cent by the end of Parliament through “tidying” regulations.
Rathi would not comment on whether the figure was achievable and responded he would “have to see the methodology”.
When pushed on the upside of growth potential, Rathi said: “I’m not here to talk about the government figures, what I would say is we as regulators, we acknowledge that how we regulate plays a role in the investment climate of the United Kingdom.”
The chair of the FCA Ashley Alder wrote for City AM in January saying the FCA had “long recognised effective regulation can be a powerful enabler of growth”.
Alder added the regulator was “ready to go further” and take on “greater risks” in pursuit of growth.
Lenders ‘too cautious’ on mortgage stress tests
Rathi said the FCA was beginning to collect evidence from lenders and consumer groups to look at relaxing mortgage ‘stress tests’.
“Already lenders can exercise judgment as to how they do the stress test, and we think that some may be being too cautious at the moment in the level of interest rate they’re stressing against,” he added.
He said the FCA was looking into changes that could be made to the regulation of mortgage lending to boost home ownership.
The hearing followed the Payment System Regulator being folded into the FCA, which was announced early this year.
Rathi stated the work of the PSR was “critical” and it would not “get lost” as a part of the FCA.
The committee pressed the FCA officials on when they were notified about the Treasury’s decision to scrap the PSR.
Alder, said “plans were in progress” in late January, “but what those plans would result in were not particularly clear.”
“Around Late February we were told it was probable an announcement would be made around the PSR but nothing specific,” he added.
Ashley said the day he learned about the announcement was on March 11 – a day before the Treasury’s official announcement.