Accountability of regulators Regulator engagement with HM Treasury, external stakeholders, and Parliament Regulators’ relationship with HM Treasury Power for HM Treasury to direct the regulator to report on performance
FSMA 2000 and the Financial Services (Banking Reform) Act 2013 establish multiple ways for the regulators to report on their performance to support scrutiny and accountability. These include a requirement for the regulators to report annually, setting out, amongst other things, how they have advanced and acted compatibly with their objectives and had regard to the regulatory principles. Within their annual reports, HM Treasury may also direct the FCA and the PRA to include ‘such other matters’ as HM Treasury considers appropriate.
	In addition, on a voluntary basis, the FCA annually publishes ‘operating service metrics.’ These are metrics relating to how the FCA carries out routine customer service functions, including authorisations, timeliness of responses to stakeholders, and regulatory permissions requests. In April 2022 the FCA published a comprehensive set of Outcomes and Metrics which it will use to measure and publicly report on its performance. The PRA also annually publishes data on its performance of authorisation processes.
	On 1 December 2022, the government published an exchange of letters setting out its commitment to ensuring the UK has world-leading levels of regulatory operational effectiveness. In response, the regulators have committed to publishing more detailed performance data in relation to authorisation processes on a quarterly basis in future. Given the regulators’ new responsibilities following the repeal of retained EU law, and the introduction of new growth and competitiveness objectives for the FCA and the PRA, the government considers that there is an increased need for the regulators to publish further information about their performance, to support their scrutiny by Parliament and government and engagement with stakeholders.
	The Act introduces a power of direction for HM Treasury to direct the regulator to publish a report on such matters, at specific intervals, as HM Treasury considers necessary to support scrutiny of their performance in discharging their general functions. This will enable HM Treasury to direct the regulators to publish additional information to support the review and scrutiny of their discharge of their general functions. This includes how the regulators have acted compatibly with and advanced their objectives, and had regard to the regulatory principles, as well as wider operational effectiveness. HM Treasury will be required to lay any direction in Parliament, to notify it of the use of the power.
	HM Treasury expects that this power will only be used in exceptional circumstances, in cases where existing forms of engagement have been exhausted. It provides a backstop to ensure that the regulators can be directed to provide further information on their performance where required while respecting their operational independence and expertise. This will support their accountability to Parliament and the public.
	HM Treasury will only be able to exercise the power where it has determined that:
publication of the information is necessary for scrutiny of the regulator’s discharge of its functions; and
that any information already published is insufficient for effective scrutiny.
	HM Treasury will not be able to issue a direction that would require publication of the relevant information more than once a quarter. Given the requirement for information to relate to the discharge of the regulator’s functions, HM Treasury expects that directions will only relate to matters within the regulator’s remit.
	HM Treasury will be required to consult the regulator before exercising this power. This will allow for HM Treasury and the regulator to consider factors such as whether the information can reasonably be collected, recorded, and published by the regulator, ahead of the direction being issued. HM Treasury will also be required to have regard to the desirability of minimising adverse effects on the regulators’ other functions when exercising the power.
	This power cannot be used to require the regulator to publish information that is confidential for the purposes of Part 23 of FSMA 2000 in relation to the FCA and the PRA, section 91(2) of FSBRA in relation to the PSR and Part 23 of FSMA 2000 as it applies in relation to the Bank of England.
	The regulator will be required to publish the report. However, there is an exemption from publishing information where doing so would be against the public interest in the regulator’s opinion.
	This power will apply to the FCA, the PRA, the PSR, and the Bank of England in its regulation of certain financial market infrastructure.