Regulation in the time of Covid: Part 3 (49) 18/3 - Brave new world of diversity

Starting on 16 March last year, I began writing daily blogs about the impact of the Covid crisis on financial regulation. Other issues, notably Brexit and digitisation, have featured as well but Covid remains the dominant driver of regulation as we enter 2021.

On the face of it, this week's two speeches, by the respective CEOs of the PRA and FCA, have little in common. Sam Woods (PRA) spoke about the future regulatory framework (FRF) post Brexit, and specifically the rule-making powers that HMT wants to delegate to regulators. Meanwhile, Nikhil Rathi (FCA) alerted the industry to regulators' plans to push for greater diversity in firms, including the possibility of imposing new requirements. Yet they are linked because the alert would carry much less weight without the delegation of rule-making.

I've posted before about the FRF, and how infeasible it would be for Parliament to devote sufficient time to financial regulation; so delegating authority to the regulators is by far the most realistic option. Another reason for delegation is that individual rules could become extraordinarily contentious politically. Within regulation, and in discussions with the industry, the case for greater diversity is relatively uncontroversial; how to get there is far harder. Translated into the political area, this could become a much more fraught debate.

Part of the focus around the FRF has rightly been on future accountability. In this regard, both speeches highlight some of the challenges of assessing regulatory performance; the PRA doesn't yet a have a resolution authority for insurers and could yet be left exposed, while the effectiveness of any requirements on diversity could only really be tested over the long term. Holding regulators properly accountable, whether to Parliament or an independent authority, is really important but will rarely be easy.

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If you have a few minutes, I recently published an article looking at the regulatory top 10 themes for financial services.

And last but not least, you can watch the latest financial services regulatory update webinar, where David Morrey and I dissect what's really happening in regulation.