Jacqui Hatfield, Partner and Head of the Financial Services Advisory Group at Reed Smith LLP, comments on the results of the Treasury's latest consultation document on the future of the UK regulatory system:
The Future of the PRA and FCS
"It didn't matter what co-ordination measures were put in place, such as the Memorandum of Understanding, the Bank of England and the FSA never got on. If this lack of co-operation remains the case with the PRA and the FCS, any co-ordination measures put in place will not work - they need to learn to talk to one another."
Enforcement warning notices
"It is difficult to see any reason why customers should be pre-emptively warned of enforcement notices against a firm. This will be before any action has been taken and a decision has been made against the firm in question. Publishing these notices will cause damage to the firm from the date that the notice was issued and even if later a notice is issued that enforcement action has been terminated, the reputational damage will already have been done."
EU and International representation
"It is appropriate that a member of FCA represents the ESMA, but not necessarily appropriate that the PRA solely represents EBA and EIOPS. Conduct issues are important in respect of EBA and EIOPS as well.
Whilst there will be co-ordination measures put in place so that the PRA and FCS consult with one another, it will appear on the international circuit that EBA and EIOPS are not represented in the UK on conduct issues. In addition, it is unlikely that the PRA, even with FCS' views on conduct issues, will be as enthusiastic in defending the UK on these issues as it will be with prudential issues."
"Dual-regulated firms will now be subject to longer authorisation processes (PRA needing to give approval for prudential and approved persons, which could affect prudential issues eg significant influence functions like the CEO). They will also be subject to two lots of levies, supervision and threat of enforcement."
FCS name change
"The name change from the CPMA to the FCS is a good one but why is the PRA's name not changing? The PRA is only responsible for the prudential regulation of significant influence firms, not all firms and the name is confusing as a result of this. Perhaps it should be called the Significant Influence Firms Prudential Regulatory Authority or Financial Stability Prudential Regulatory Authority."
Notes to editors
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