The bosses of the UK’s City watchdog have said that its independence and international reputation could be undermined if ministers introduce controversial “call-in powers” allowing them to intervene in financial regulation.
Richard Lloyd, interim chair of the Financial Conduct Authority (FCA), told parliament’s Treasury committee: “Even if it is used very sparingly … the perception that comes with the ability of ministers to direct independent regulators clearly will go to undermining our independence.
“We have been very clear with ministers that is of great concern to us.”
The previous government, under Liz Truss, backed giving new powers to the Treasury to overturn decisions by financial regulators including the FCA, the Prudential Regulation Authority, which is part of the Bank of England, and the Payments Systems Regulator if they deem it in the public interest.
The move was part of a wave of measures in the financial services and markets bill currently going through parliament and would allow government to amend or revoke regulations where it deems there are matters of significant public interest.
The Treasury looks to be likely to push ahead with the plans for the “call-in powers” under Truss’s successor, Rishi Sunak.
Lloyd told MPs that allowing ministers to get involved in financial regulation could harm the FCA and the UK’s international standing.
His position echoes previous comments by the governor of the Bank of England, Andrew Bailey, who has spoken out against the government’s proposed veto power.
Lloyd said: “Our competitiveness in financial services internationally, our reputation, is in part built very clearly on the perception, the reality, of the independence of regulators.”
He added: “It would be unwise to create a perception that rules will be made by future ministers, potentially overriding the evidence-based decision-making of the FCA board.”
Lloyd said the watchdog had been told by statutory panels, market players and consumer groups that any intervention would dent the FCA’s reputation.
The watchdog’s chief executive, Nikhil Rathi, told MPs he had not been provided with any examples “where there has been an issue with how the rules have been made”.
Rathi said the proposed new regulation “really would be a very big departure from any established practice, for there to be political rule-making”.
The City minister, Andrew Griffith, has yet to set out the wording of the new powers, and recently signalled a delay in putting them forward.
He said last month that he respected the operational independence of Britain’s financial watchdogs, but ministers should have room to intervene.
