Accountability of regulators Regulator engagement with HM Treasury, external stakeholders, and Parliament Regulators’ relationship with HM Treasury Mechanism to require the regulators to notify HM Treasury on actions affecting international trade obligations
Following the UK’s withdrawal from the EU, the UK has assumed responsibility for its own trade policy. This includes negotiating and entering into new international trade agreements and ensuring the compatibility of domestic policies and rules with our obligations in international trade agreements. Previously, the EU was responsible for managing any claims made by trading partners under trade agreement dispute settlement mechanisms. The UK government is now responsible for managing dispute settlement with trading partners and must therefore ensure that it has appropriate visibility over the regulators’ setting of domestic financial services policies and rules to fulfil this duty.
	As noted earlier, moving to a comprehensive FSMA model of regulation will give the regulators significant new rule-making responsibilities. These rule-making responsibilities interact with obligations in the UK’s trade agreements in a number of ways, such as the need to ensure that regulatory rules and supervisory policy are not discriminatory and that they are consulted upon and published in a transparent manner. As the extent of the regulators’ rule-making responsibilities expands, the number of interactions with the UK’s international trade agreements is also likely to increase.
	Currently, HM Treasury and the regulators work together closely to ensure that the rules and supervisory policy overseen by the regulators are compliant with obligations in the proposed trade agreements when they come into force. This mechanism seeks to ensure that, in the years following the conclusion of each international trade agreement, regulatory rules and supervisory policy/practice remain consistent with the UK’s obligations arising from those agreements.
	The Act introduces a statutory requirement to require the regulators to consider, when setting rules or supervisory policies and practices, the effect of their proposed action on international trade obligations. The regulators need only consider those international trade obligations which relate to financial services and markets. Where the regulators see a material risk of incompatibility between their action and international trade obligations, they must notify HM Treasury. Where there is a duty to consult in relation to the action, the regulator must notify HM Treasury prior to their public consultation.
	This mechanism is intended to sit alongside existing HM Treasury powers in Section 410 of FSMA 2000, that allows HM Treasury to direct the FCA, the PRA and the Bank in exercising certain functions to take action (or refrain from taking action) in order to ensure that the UK meets its international obligations. While this power will remain the means by which HM Treasury could ultimately ensure UK compliance with its obligations in trade agreements, this mechanism seeks to ensure earlier, proactive consideration by the regulators of how their actions interact with the UK’s international trade obligations.
	This mechanism will also apply to the Bank of England in relation to its regulation of CCPs and CSDs. This is to be consistent with the scope of the wider FRF Review changes taken forward in the Act regarding the regulation of FMI by the Bank.
	A separate analogous mechanism will also apply to the PSR by amendment to the Financial Services (Banking Reform) Act 2013 (see paragraph 8 of Schedule 7).