New objectives and regulatory principles FCA and PRA objectives and regulatory principles
The statutory framework for the Financial Conduct Authority (FCA) is set out in Chapter 1 of Part 1A of, and Schedule 1ZA to, FSMA 2000. This Part sets out the FCA’s general functions which consist of making rules, making technical standards in certain circumstances, issuing codes and guidance and determining its general policy and principles by reference to which it performs particular functions under FSMA 2000. Part 1A also sets out the FCA’s strategic objective, three operational objectives and the regulatory principles which the FCA must advance and have regard to, respectively, when discharging its general functions.
	The statutory framework for the Prudential Regulation Authority (PRA) is set out in Chapter 2 of Part 1A of, and Schedule 1ZB to, FSMA 2000. This Part sets out the PRA’s general functions which consist of making rules, making technical standards in certain circumstances, issuing codes and determining the general policy and principles by reference to which it performs certain functions under FSMA 2000. Part 1B also sets out the PRA’s general objective, insurance objective and secondary competition objective together with the regulatory principles which the PRA must promote and have regard to, respective, when discharging its general functions.
	When discharging its general functions, the FCA must, so far as is reasonably possible act in a way which is compatible with its strategic objective and advances its three operational objectives. The three operational objectives are detailed in sections 1C, 1D and 1E of FSMA 2000. The FCA’s operational objectives are concerned with consumer protection, protecting the integrity of the UK financial system and promoting effective competition. The FCA’s strategic objective is to ensure that relevant markets function well.
	The Act inserts into FSMA 2000 a new secondary objective for the FCA which requires it, so far as is reasonably possible, when discharging its general functions in a way that advances its objectives, to act in a way which advances the international competitiveness of the economy of the United Kingdom and its growth in the medium to long term.
	The Act creates a new requirement for the FCA to make two reports to HM Treasury on how it has complied with its duty to advance the secondary competitiveness and growth objective.
	When discharging its general functions the PRA must, so far as is reasonably possible, act in a way which advances its general objective. The PRA has a general objective, an insurance objective and a secondary competition objective.
	The PRA’s general objective is to promote the safety and soundness of PRA-authorised persons. The insurance objective is to contribute, so far as is reasonably possible, to the securing of an appropriate degree of protection for those who are or may become policyholders. This applies where the PRA is discharging its general functions so far as relating to a PRA-regulated activity relating to the effecting or carrying out of contracts of insurance. The secondary competition objective requires the PRA, when discharging its general functions in a way that advances its objectives must, so far as is reasonably possible, act in a way which facilitates effective competition in the markets for services provided by PRA-authorised persons in carrying on regulated activities.
	The Act inserts an additional secondary objective in FSMA 2000 for the PRA which requires it, when discharging its general functions in a way that advances its objectives, to act in a way which facilitates the international competitiveness of the economy of the United Kingdom in the medium to long term.
	The Act creates a new requirement for the PRA to make two reports to HM Treasury on how it has complied with its duty to advance the secondary competitiveness and growth objective.
	Section 1B(5)(a) of FSMA 2000 requires the FCA to have regard to the regulatory principles in section 3B of FSMA 2000 when discharging its general functions. Section 2H(2) of FSMA 2000 requires the same of the PRA. Section 3B of FSMA 2000 sets out eight regulatory principles which apply to the FCA and the PRA.
	The regulatory principle in section 3B(1)(c) of FSMA 2000 requires the FCA and the PRA to have regard to the desirability of sustainable growth in the economy of the United Kingdom in the medium or long term ("the sustainable growth principle").
	The Act removes the existing sustainable growth principle and introduces a new regulatory principle which refers explicitly to section 1 of the Climate Change Act 2008 and section 5 of the Environment Act 2021. The new regulatory principle will be engaged where the relevant regulator considers the exercise of its functions to be relevant to the need to contribute towards achieving compliance by the Secretary of State to the referenced targets.
	The Act makes consequential amendments to Part 9C of FSMA 2000 to take account of the new principle in section 3B(1)(c) of FSMA 2000.
	The statutory framework for the PSR is set out in Part 5 of FSBRA 2013. This Part establishes the PSR as the authority responsible for exercising functions in relation to payment systems; makes provision in relation to designating payment systems as a regulated payment system; and contains provisions about the general duties of the PSR, its regulatory and competition functions. Part 5 includes the ability of the PSR to make directions, which is the PSR’s principal regulatory tool, and encompasses the regulatory principles and objectives which underpin the creation of the authority.
	The statutory principle in section 53(c) of FSBRA 2013 requires the PSR to have regard to the desirability of sustainable growth in the economy of the United Kingdom in the medium or long term ("the sustainable growth principle").
	The Act amends the PSR’s sustainable growth principle so that it refers to section 1 of the Climate Change Act 2008 and section 5 of the Environment Act 2021. The amended regulatory principle will be engaged where the PSR considers the exercise of its functions to be relevant to the need to contribute towards achieving compliance by the Secretary of State to the referenced targets.