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CML responds to Treasury on regulation


Published: 12 April 2011 | Author: Bernard Clarke

Responding to a Treasury consultation on financial regulation, the CML is calling for a co-ordinated, proportionate and cost-effective approach.

Our response to the Treasury’s consultation on its document, A new approach to financial regulation: building a stronger system, supports the view that financial stability should be a fundamental objective, but argues that regulators must be alert to the consequences for competition, as well as cross-market, cross-border and socio-economic, issues. The CML response, which will be submitted later this week, highlights the need for:

  • co-ordinated, proportionate and evidence-based regulation, targeted at current or emerging prudential and conduct risks, with measures to safeguard against retrospective action designed to solve the problems of the past;
  • a nuanced approach to consumer protection in retail markets, acknowledging that different types of consumers have different needs;
  • effective safeguards to ensure that more robust regulation and new tools are only deployed when necessary and without adverse consequences;
  • the Prudential Regulation Authority’s (PRA) ‘judgement-led approach’ to be based on evidence, driven by a credible process and not subject to external pressures;
  • greater attention to the co-ordination and cost-effectiveness of regulation, which, as drafted, may be left too much to chance and individual interpretation; and
  • the setting up of practitioner, smaller business practitioner, and market and consumer panels that overarch both the PRA and the Financial Conduct Authority to help ensure that the cumulative effects of prudential and conduct regulation are assessed on markets, firms and consumers.