The widely anticipated Treasury consultation on the break-up of the Financial Services Authority was published in July with few surprises. The consultation identifies global economic imbalances, misunderstood risk, unsustainable business models and the excessive build-up of debt across systems and markets as being prime causes of the financial crisis and its aftermath.
The consultation proposes the creation of a number of new entities including a Financial Policy Committee with responsibility for maintaining financial stability, the transfer of powers from the FSA to a new Prudential Regulation Authority and the creation of a new Consumer Protection and Markets Authority to promote confidence in financial services and markets.
I believe the broad thrust of the recommendations is to be welcomed. High-level proposals on the possible amalgamation of the Financial Reporting Council and the UK Listing Authority are also included, with a further detailed consultation expected from the Department for Business, Innovation and Skills in the autumn.
The institute will be responding in detail to the consultation in due course. Our overarching message will be that the events of the last two years have been global in nature and that the regulatory response must be capable of joined-up implementation across markets.
From a UK perspective, in order to tackle the £890bn structural deficit, we need an enterprise-led recovery. The financial services sector needs to be a key driver here, and the new regulatory architecture needs to ensure that this sector as a whole is put on a more sustainable footing. At the same time, we must ensure that the burden of regulation is not disproportionate to the task in hand.