THOUSANDS of banks and insurers could be forced to pay through the nose to comply with the biggest overhaul of financial regulation in a decade, because they will have to deal with two regulators instead of one.
The government made the admission as it began a three-month consultation on plans to scrap the Financial Services Authority and replace it with two new regulators.
A Prudential Regulation Authority (PRA) – which will operate as a subsidiary of the Bank of England – will be responsible for banking supervision, while the Consumer Protection and Markets Authority (CPMA) will take on the remainder of the FSA’s duties. A new Financial Policy Committee (FPC), charged with spotting the build of risk in the financial system, will also be created.
But in an impact assessment released yesterday, the government said between 1,500 and 2,000 firms – mostly banks and insurance companies – are “likely to incur transitional costs in making arrangements to deal with two regulators rather than one”. It also warned of “higher ongoing costs”. The overhaul is expected to set the taxpayer back by around £50m.
Meanwhile, plans for an Economic Crime Agency charged with stamping out white collar crime appear to have been delayed. The government was expected to launch the ECA alongside the two new regulators, but yesterday Mark Hoban, the financial secretary to the Treasury, told City A.M. a separate consultation will now be launched at a later date.
Before the election, sources close to chancellor George Osborne insisted he would table legislation “as early as possible in the next parliament”.
Yesterday, the government appeared to step away from this firm commitment. “The government proposes to consider, as part of possible wider reforms to the approach to tackling economic crime, whether to transfer responsibility for prosecuting criminal offences… to a new Economic Crime Agency (ECA),” it said in its consultation document on regulatory reform.