Powers allowing ministers to intervene in regulatory matters must not be “politicised” and should only be used “in extremis”, City chiefs have warned today, as the government prepares to grant itself greater oversight of regulators in the financial services and markets bill.
The landmark bill is looking to unleash a “Big Bang 2.0” in the City by scrapping EU-era regulation and boosting the political oversight of regulatory decisions, with ministers set to grant themselves ‘call-in’ powers to overrule regulators.
But speaking at the committee stage of the financial services and markets bill today, chief of banking body UK Finance David Postings said it must not be a lever for politicians to meddle in regulatory decisions.
“The most important thing is that it’s used sparingly, and that it is drawn tightly,” he told MPs.
“It should be something that’s very rarely used and not politicised – we need to get the balance between scrutiny the regulators, and not politicising it.”
He added that striking the balance would be “very difficult to pull off”.
Posting’s comments echoed those of CityUk managing director Emma Reynolds, who warned that the government needed to tread a fine line between “enhanced regulatory accountability” and the independence of the UK’s financial watchdogs.
The specific powers are yet to defined by ministers but City minister Andrew Griffiths doubled down on the decision last week and said it was “not uncommon to have a public policy safety valve”.
The move to boost government oversight has prompted guarded warnings from the regulators in recent weeks over the sanctity of their independence.
The Prudential Regulatory Authority (PRA), which supervises the UK’s banking and insurance sectors, said last month that regulators should not come under “undue pressure to weaken regulatory standards” or “accept changes that could impede our ability to achieve our primary objectives”.
City watchdog the Financial Conduct Authority has similarly backed the need for independence and said it was crucial to maintaining the City’s status as a global financial hub.