Accountability in prudential regulation of financial markets: a response to HM Treasury's 2011 consultation paper, A New Approach To Financial Regulation

The focus of the response is on accountability to Parliament of all aspects of prudential (systemic) regulation. Consideration should be given to direct reporting to Parliament in respect of all aspects of prudential regulation, including regulation of market infrastructure. Routing this relationship through a government department might be as unsatisfactory for the future as it proved in the recent past. There are implications in relation to the Prudential Regulation Authority, for the Financial Conduct Authority and for their relationships with the Bank and the Treasury. The PRA and the FCA should report directly to Parliament, both routinely and in cases of any ‘significant regulatory failure’. The fewer stages in, siftings of and renegotiations involved in regulatory accountability, the better, from the point of view of Parliament’s ability to satisfy itself on arrangements for financial stability. Such accountability should extent to UK activities in relation to EU financial market regulatory authorities and also international bodies.