The Treasury Select Committee (TSC) today highlights the FSA's swift dismissal last year of a proposal to delay the introduction of RDR as evidence of accountability and culture failings at the regulator, and said the same problems must not "plague" its replacement, the Financial Conduct Authority (FCA).
The TSC today published a report into the FCA containing a number of recommendations for the government ahead of the drafting and publication of the Financial Services Bill early this year.
According to the TSC, the FSA has not succeeded in protecting the public from "spectacular regulatory failings".
It said a higher level of accountability to politicians would help the FCA avoid similar problems, which have "plagued" the current regulator.
The government proposed a draft law last June to implement reforms which scrap the FSA and divide its tasks between the FCA and a new Prudential Regulation Authority (PRA) at the Bank of England.
In today's report, the TSC said: "When we reported on our inquiry into the RDR in July 2011, the FSA rejected our recommendation [of a year's delay] within hours of the embargoed copies of our report being issued.
"We have since received an apology from the FSA for the handling of this issue, but the fact that a non-elected public body would so hastily dismiss recommendations from a parliamentary committee raises concerns about the accountability and culture of the FSA."
Also citing the need for key personnel to be answerable to parliament, the committee made four key recommendations on improving accountability:
- That the board of the FCA publish full minutes of each meeting.
- That the legislation provide that the Chief Executive of the FCA be subject to pre appointment scrutiny by this committee.
- That the legislation provide that the FCA Board be responsible for responding to requests for factual information and papers from Parliament.
- That the legislation provide that Parliament may request retrospective views of the FCA's work.
Andrew Tyrie, chairman of the TSC, said: "The plain fact is that the FSA did not succeed in protecting consumers from spectacular regulatory failures. The mis-selling of PPI and endowment mortgages are just two examples.
"The FSA is not only expensive, for which the consumer always pays, but many have told us that it has also become bureaucratic and dominated by a box-ticking culture."
"A higher level of accountability to Parliament can help provide better quality regulation and avoid the problems that have plagued the FSA in recent times."
The committee was also keen to see the FCA have a primary objective to promote effective competition for the benefit of the consumer. But it stopped short of recommending the Office of Fair Trading's (OFT's) competition powers be transferred to the FCA.
"While we recommend that the FCA be given a formal competition objective, requiring it to consider where financial services and markets are operating in a way which is consistent with competition, we were not convinced of the need to transfer the OFT's powers with respect to competition law to the FCA," the report reads.
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