Proposed mandate changes for the UK’s two main financial regulators have been widely criticised by environmental and social groups who are concerned that international competitiveness and growth are being made new objectives, ahead of climate change and social inclusion.
The measures, which will affect the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA), are contained in the financial services and markets bill, part of wide-ranging reform of the UK’s financial sector in the wake of Brexit. The bill would add a “regulatory principle” requiring the FCA and PRA to “have regard” to UK emissions targets when exercising their regulatory functions. However, it falls short of adding those targets as a statutory objective alongside the imperatives of competitiveness and growth.
During the bill’s second parliamentary reading on Wednesday, the UK’s only Green party member immediately focused on the issue. “In this new bill, there’s a new statutory objective on competitiveness and growth and that puts those objectives higher than the UK’s legally binding nature and climate targets,” Caroline Lucas told Treasury economic secretary Richard Fuller. “Given that a thriving economy depends on a thriving environment, would he look again and consider introducing a climate and nature-specific statutory objective too, so you’ve got two statutory objectives and not a regulatory principle, which are not the same thing.”
Responding for the government, Fuller said that Lucas was right to point to the importance of the regulatory objectives, but suggested that growth and competitiveness are more important to the stability of UK financial services and are “fundamental demands” of the British people. However, he accepted that the importance of the issue and said it would be discussed in depth at a later stage.
The new objectives were the subject of a joint statement from 37 civil society groups, released earlier this year. “The purpose of financial regulation should reflect that the role of finance is to serve the UK’s economic, environmental and social goals, and this should be expressed in the statutory objectives of regulatory institutions,” the coalition said, warning that a competitiveness objective would “facilitate untransparent lobbying that steers policy away from the public interest”. Instead, the statement called for Paris-aligned emissions targets and financial inclusion to be added as statutory duties.
A joint briefing from the Finance Innovation Lab, WWF and ShareAction also called for emissions targets to be added as a statutory objective for regulators, saying that the financial services and markets bill represents a “once-in-a-generation opportunity to legislate for action on climate and nature”.
Having completed its second reading, the bill will now be discussed at committee stage, where detailed examination and alteration will take place. The final version is expected to become law in 2023.
This page was last updated September 8, 2022
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