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Global Trustee and Fiduciary Services News and Views
| Issue 47 | 2017
55
the Consumer Financial Protection Bureau
was created in 2008 to protect consumers,
while in the UK, the former single regulator,
the Financial Services Authority, has been
broken into separate regulators — the
Prudential Regulation Authority (PRA) and
the Financial Conduct Authority (FCA) —
with the aim of sharpening the minds of
each regulatory body to ensure that both
prudential and conduct forms of regulation
would receive sufficient attention.
The review of reviews into HBOS
There may be yet more structural change
to come in the UK. The TSC’s July paper,
Review of the Reports into the Failure of
HBOS, amounted to a literature review of
the various reports already published on
HBOS’s collapse, though the TSC did take
some new evidence of its own.
1
The TSC pointed to earlier concerns about
the coordination between the supervision
and the enforcement functions inside what
was then the FSA. HM Treasury (HMT)
undertook a review into enforcement
in December 2014
2
that “accepted that
there was the potential for a degree of
tension between the two functions”.
However, HMT “argued that cooperation
between supervision and enforcement
was likely to be ‘imperilled’, not improved,
by separation”.
The regulators at the time said that they
supported the HMT’s conclusions that
enforcement and supervision functions
should continue within the regulatory
bodies themselves. Sir Brian Pomeroy, then
a non-executive director at the FCA, was
quoted as saying that there was a trade-off
between “coordination, a free exchange of
information and independence”.
The TSC concluded that the question of enforcement separation should be looked at again. Three reasons were put forward for this:
The collapse of HBOS was a
prudential failing. Yet, the bulk
of enforcement staff sits within
the FCA. An independent
enforcement function “could
and should sit equidistant
between the PRA and the FCA”.
A separate body would “bolster
the perception of the enforcement
function’s independence”. The
current system, in which the
same organisation supervises,
applies and prosecutes the law, “is
outdated and can be construed as
unfair”. Separation could “increase
confidence in the impartiality
of regulatory enforcement
decisions, and facilitate objective
scrutiny of supervisors’ actions by
enforcement staff”.
Separation would allow the
FCA, the PRA and the
enforcement body itself to be
clearer about their objectives.
Better accountability and
outcomes would follow.