Mark Hoban, the Treasury financial secretary, has defended the “democratic deficit” that exists between parliament and the FSA.
At a Treasury select committee meeting today, George Mudie, committee member and Labour MP, asked Hoban whether he is worried with the suggestion that the regulator ignores parliament and the financial services industry on regulatory issues. Mudie referenced the concerns raised in last night’s parliamentary retail distribution review (RDR) debate.
Mudie said: “At the end of the day, apart from making those statements in the house, it appears that the last word is with the regulator. Is nobody in the Treasury or the government uncomfortable with this – what even the bankers call – democratic deficit?”
Hoban responded by saying the regulator is listening to the opinions of others on topics like RDR and MMR but, at the same time, stressed that it is important to have a regulator which is independent and can “get on with their job”.
He said: “I think that there is always a risk that their independence, credibility and authority is undermined if it is seen that they are becoming politicised. So I think you need to get that balance of scrutiny and accountability right, but also recognise that we should be setting up a framework for the regulators that leaves them to get on with their job.” (article continues below)
The committee members also asked if the Consumer Protection and Markets Authority would have a primary objective to promote competition. Hoban did not say the new regulator would have a specific remit to promote competition but stated it would ensure confidence in the markets and, therefore, competition would “flow” from that confidence.
Hoban also denied that Mervyn King, the Bank of England (BoE) governor, would have too much power under the new regulatory set up. King will chair both the Financial Policy Committee and the Prudential Regulatory Authority, while keeping his role as governor of the BoE.