Financial Services has always been a tricky subject for the Treasury Select Committee (TSC). While they exist to examine and scrutinise policies set by the Treasury and all of its associated bodies, the FCA, in particular, has proven elusive – largely by design. After facing months of criticism for rising regulatory costs, and being threatened with the creation of a new committee to focus specifically on financial services, the TSC’s Chair, Mel Stride, has responded by launching a new inquiry on the “Future of Financial Services”.
The purpose of the inquiry is clearly twofold, and Stride has made no attempt to hide this. Firstly, the TSC does genuinely want to understand what the future of the financial services industry will look like after the Brexit transition period ends. Secondly, as written on the government website, “It will examine how financial services regulations should be set and scrutinised by Parliament… It will also consider how regulators are funded”.
Starting with the political motivation, the TSC’s desire to increase parliamentary oversight is being driven by MPs. Faced with rising complaints from the FS industry, Kerry McCarthy MP wrote to the economic secretary to the Treasury in September, to demand action. His response was as follows:
“Although the Treasury sets the legal framework for the regulation of financial services, it has strictly limited powers in relation to the FCA. In particular, the Treasury has no general power of direction over the FCA and cannot intervene in individual cases. The independence of the FCA is vital to its role. Its credibility, authority, and value to consumers would be undermined if it were possible for the government to intervene in its decision-making.”
However, when faced with angry constituents, and increased criticism of the FCA in the media, these arguments have not proven persuasive enough to a core group of MPs. Rather than risk the government being forced to act and potentially create a new committee to oversee the FCA, Stride has decided to act. The inquiry will be used to gather information to support increased parliamentary scrutiny of the FCA and prove to MPs and the media that the TSC is the right committee for the job.
As a fortunate and timely byproduct, they will also gather views on what the industry believes the future UK regulation should look like post-Brexit. The questions that don’t focus on managing the regulator cover the following: financial services priorities in future trade negotiations, skills and immigration policies, and supporting the emergence of a FinTech sector. These issues are all critical to the future of the UK financial services industry. For those who have opinions and aspirations to be a thought leader in the sector, this inquiry does represent a good opportunity to engage with policy decision-makers and influencers at a very early stage of their thinking.
And yet… in an inquiry called the “Future of Financial Services”, more could have been done to truly consider the future of an industry that is crucial to the UK economy. While Stride and the TSC may succeed in reigning in the FCA, they will, at some point, have to plan for a future that is now only a month away.