Treasury Select Committee Chairman Mel Stride said Money Marketing it is “not immediately clear” how the merger of the various UK regulators will produce results.
The Financial Times recently reported that Conservative leadership candidate Liz Truss had considered merging various UK regulators.
Thus, the Financial Conduct Authority, the Prudential Regulation Authority and the Payment Systems Regulator would merge to create a “mega regulator”.
This report was based on sources inside the Truss leadership campaign.
Still, Stride has expressed reservations about the idea.
He said: “It is not immediately clear how the merger of UK regulators will deliver results, not least because the FCA is in the midst of a major transformation program at a time of considerable economic uncertainty.
“I think we have to be very careful not to revert to the regulatory model that prevailed during the financial crisis, which is widely recognized as having been ineffective.”
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The FCA declined to comment on its potential merger with the other regulators.
AJ Bell, head of pension policy, Tom Selby, pointed out that the three regulators play different roles in the UK regulatory system.
“It will be important that any merger maintains the key protections that each individual regulator is currently responsible for,” he said.
“The city’s former regulator, the Financial Services Authority, was dismantled following the financial crisis.
“Reversing this decision to bring regulatory powers together again under one roof would be a major undertaking.”
He added that there were stronger arguments for “folding at least some of the responsibilities” from the pension regulator to the FCA.
He said: “Although TPR and the FCA often work together, they continue to set rules independently.
“Having two regulators for what is essentially the same product carries a constant risk of inefficiency, with rules either duplicated or applied in different ways.
“It can also lead to wasted resources and confusion, especially for companies that operate in both the trust and contractual pension worlds.
“At the very least, an examination of whether TPR’s regulation of trust-based defined contribution (DC) plans could be done more effectively by the FCA would appear to have some merit.”
The FCA launched its transformation program in July 2021. It aims to make the regulator a “more innovative, more assertive, more adaptive” organisation.
As part of the program, CFA also wants to measure its success by being clearer about what results matter and what metrics it uses to measure them.
The new British Prime Minister will be announced on September 5. According to YouGov, Liz Truss is ahead of her opponent Rishi Sunak by 66% to 34%.