Treasury consultation on new regime of financial regulation

27 July 2010

The Treasury has produced a consultation document setting out the Government's vision for a new regime of financial regulation in the aftermath of the recent financial crisis. The consultation heralds a plethora of related consultations in relating to proposals for a new Economic Crime Agency (ECA) and a new Companies Regulator.

In wide-ranging proposals, the Government is seeking to disband the current tri-partite regime (involving the Bank of England, the Treasury and the FSA) and replace it with:

- a Bank of England and Financial Policy Committee (FPC) which will have statutory responsibility for maintaining financial stability and will "focus on macro-prudential analysis and action, to ensure that risks developing across the financial system as a whole are identified and responded to".

- a Prudential Regulatory Authority (PRA) which will oversee the stability of individual banks and insurers; and

- a Consumer Protection and Markets Authority (CPMA) with the statutory responsibility to promote confidence in financial services and markets through "the protection of consumers" and the promotion of "the integrity and efficiency of the UK’s financial markets".

Whilst it is envisaged that the CPMA will have enforcement responsibility for the codes of conduct it imposes on regulated firms, whether its remit would extend to, for example, criminal prosecution of insider dealing cases as currently undertaken by the FSA, will be considered in forthcoming consultation regarding the setting up of an ECA (taking in the SFO and other prosecuting bodies), as announced in George Osborne's Mansion House Speech.

Also under consideration is the whether the FSA's current role as the UK Listing Authority should transfer to the CPMA or be situated along with the Financial Reporting Council within a new Companies Regulator as a response to the perceived need for "a powerful companies regulator established with responsibilities for regulating corporate governance, corporate information and its disclosure, and the stewardship of companies by institutional shareholders". The new regulator would sit within the Department of Business, Innovation and Skills who will issue consultation proposals in due course.

The full text of the Treasury consultation document can be found here.

The consultation period closes on 18 October 2010.