Government considers merging FRC and FSA

The government has proposed merging the UK’s listing authority, the Financial Services Authority, with the Financial Reporting Council, the body that regulates the accounting profession and financial reporting in the UK.

The proposal comes in a paper published by The Treasury today as part of proposals for sweeping reform of financial regulation in the UK.

A consultation paper from the government said that merging the FRC with the UK’s listing authority “would have the benefit of bringing the UKLA’s regulation of primary market activity alongside FRC functions relating to company reporting,audit and corporate governance.”

The proposals is that the new regulator would “under”, or supervised by, the department for business and come under the responsibility of business secretary Vincent Cable.

Cable has expressed misgivings about the restricted number of big audit firms nad has spoken opening up the audit market to more firms.

The Treasury consultation document said: “The Government believes that, within the proposed new regulatory architecture, there is a strong case for a powerful companies regulator established with responsibilities for regulating corporate governance, corporate information and its disclosure, and the stewardship of companies by institutional shareholders.”

The Treasury document, A New Approach to Financial Regulation enormous change to financial regulation. It lays the creation of a Financial Policy Committee (FPC) to be housed in the Bank of England that would ensure financial stability in the UK. Reporting to the FPC would be a Prudential Regulatory Authority (PRA) and an independent Consumer Protection and Market Authority (CPMA).

The consultation document said: “Perhaps the most obvious failing of the UK system, however, is the fact that no single institution has the responsibility, authority or powers to monitor the system as a whole, identify potentially destabilising trends, and respond to them with concerted action.”

However, it is not yet decided whether the merged FSA (listing authority) and FRC should be part of the CPMA, or whether it should sit outside this framework under the department of business.

PwC responded quickly to the consultation paper saying “at this stage, the proposals remain very high level. Many questions continue to remain unanswered, including the detailed implementation roadmap. This information will be vital if this new structure is to be a success and so that firms can start planning their own transition projects.”

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