Speaking yesterday (28 October) at Mansion House, Sam Woods, chief executive of the Prudential Regulation Authority and Nikhil Rathi, CEO of the Financial Conduct Authority, cautioned against the measure, which the government still intends to push through with.
Woods warned that the call-in policy would represent “a significant shift away from a model of independent regulation”, adding that UK regulatory independence is “the basis for our international credibility”.
He concluded: “Some might think that such a power would boost competitiveness. My view is that through time it would do precisely the opposite, by undermining our international credibility and creating a system in which financial regulation blew much more with the political wind — weaker regulation under some governments, harsher regulation under others.”
The same argument was advanced by Rathi, who said: “It is vital that this independence and agility at speed is not undermined by any proposed call-in power.”
Discussing the proposal before the Treasury Committee earlier this month, Andrew Griffith, former financial services minister, said that the policy was necessary as a “safety valve” and would be used “sparingly”.
Griffith defended the amendment, which will not receive a consultation period, giving the example that how genetic testing could influence the insurance market is a matter of public policy not fit for the regulator.
However, when pressed by MPs, Griffith was unable to give a definition of ‘significant public policy interest’.
The government is also planning to change the bill to include a new secondary mandate requiring regulators to “advance the international competitiveness and medium to long-term growth of the UK economy.”
The provision was similarly criticised at the Treasury Committee meeting, as MP Kevin Hollinrake stating that this could lead to “a race to the bottom in terms of regulation”.
Rathi said that the FCA would “embrace and embed” growth as a secondary power, though he stressed that making it a primary mandate “would clearly undermine our international standing”.
However, he added that it was “vital that we do not compromise on consumer protection, market integrity and competition”.
Woods also argued that the shift with a new mandate must be done “carefully and without undercutting the primacy of safety and soundness in governing our actions”.