HMT calls for proposals regarding new FCA and PRA secondary objectives

On 9 May 2023, HM Treasury (HMT) published a call for proposals on measuring the success of the new secondary growth and competitiveness objectives for the FCA and the PRA that will be introduced under the FSM Bill.

What's the background?

The Financial Services and Markets Bill 2022-23 (the Bill), which is currently going through Parliament, delivers the outcomes of the Future Regulatory Framework (FRF) Review that sought to determine how the financial services regulatory framework should adapt to the UK's new post-Brexit position. The FSM Bill will repeal hundreds of pieces of retained EU law and give the FCA and the PRA significant new rulemaking responsibilities.

Currently, the Financial Services and Markets Act 2000 contains a number of mechanisms to ensure the FCA and PRA are accountable and transparent in how they advance their primary objectives. As the FCA and the PRA take on secondary growth and competitiveness objectives in their responsibility for replacing repealed EU rules, the FSM Bill introduces a number of additional mechanisms to increase their accountability and enhance their engagement with stakeholders.

Accountability mechanisms

During the Bill's legislative passage, Parliament has made clear that appropriate and transparent public metrics are vital to properly scrutinise the performance of the FCA and the PRA. The call for proposals indicates that two accountability mechanisms introduced under the FSM Bill are particularly relevant for the new secondary objectives, namely:

• A requirement for the regulators' annual reports to include an explanation of how, in their opinion, their objectives have been advanced, including the new secondary objectives (Clause 26 of the FSM Bill).
• A power for HM Treasury to direct the regulators to publish information where ministers consider that it is reasonably necessary for the purpose of reviewing and scrutinising the discharge of the regulator's functions.

The call for proposals closes on 4 July 2023 after which HMT will discuss the feedback with the FCA and the PRA.