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Frontrunner to become the next UK PM has big changes planned for financial regulators

The front-runner in the Britain's Prime Minister run , Liz Truss, is apparently pondering significant changes to the financial regulators in the City of London.

According to the Financial Times, Truss is now thinking on ways to combine the Financial Conduct Authority, Prudential Regulation Authority, and Payments Systems Regulator into a single entity.

A substantial restructure and review of the responsibilities of some of the key regulators in the City of London is apparently being considered by the current foreign secretary, who is the front-runner to succeed Boris Johnson at No. 10, according to campaign insiders.

Ms. Truss, who presently leads the former chancellor Rishi Sunak by 32 points, has pledged to enact a series of urgent tax cuts totaling around £30 billion (€35.5 billion), roll back the increase in national insurance contributions, and raise corporation tax as planned.

Many top Conservative party members have warned that her proposed tax cuts will fuel inflation as Britain confronts its first double-digit inflation surge (10.1%) in more than 40 years. Her plans have received a muted response.

Financial Times business columnist Cat Rutter Pooley slammed the possible shake-up, calling it a "terrible idea."

The FT's Ms Rutter Pooley said in an opinion piece that Ms Truss' proposal "belongs in the past" and that "the last thing the UK needs is the FSA redux."

The Financial Conduct Authority, she argued, "justifiably attracts criticism," with specific failings revealed in scandals involving London Capital and Finance, but these "should be arguments for a concerted effort to improve the FCA," not "cause for ripping a regulatory model only instituted nine years ago."

"Perhaps the FCA’s mandate is too broad for it to master. But any shake-up would be hugely diverting and consuming. There should be bigger priorities for the new Conservative prime minister," she concluded.

The FCA faced its first industrial action earlier this year over pay and working conditions, and the agency was featured prominently in a BBC Panorama documentary earlier this week. As a result, the decision to unite the three regulatory organizations was made.

The financial watchdog was charged with disregarding warnings about a real estate investment plan that cost 2000 people £46 million when Blackmore Bond failed. Although MPs have now asked for an investigation into the matter, the FCA did not step in for two years and claimed it was not its obligation to do so.

The Financial Times quoted a source as saying that Ms. Truss had "privately criticized" the FCA and intended to restructure the authority as part of a "wider war on technocrats."

When questioned by the Financial Times, Ms. Truss' campaign staff declined to comment on the ideas, but a source stated that the organizations will be reviewed. "No decisions have been made on the future of regulators. Liz will look at their role as part of a review. She’s clear that there has not been enough focus on economic growth," they continued.

The FCA currently has 4,000 employees and is in charge of monitoring the behavior of UK-licensed banks, financial institutions, and now cryptocurrency platforms. According to the Financial Times, the PRA, which is housed within the Bank of England, has 1,350 employees and is in charge of "safeguarding the financial health" of some of the biggest financial institutions in the UK.

The Payments Systems Regulator, a division of the FCA that employs 130 people, has the authority to establish standards, order operators to grant direct access to payment systems, and impose obligations on system regulations.

In 2013, the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) were split from the Financial Services Authority, which had come under scrutiny for failing to adequately regulate banks prior to the financial crisis.

According to media sources, the Bank of England, the PSR, and the FCA all declined to comment, while the FCA stated that it was "unable" to do so.

Ms. Truss criticized the Bank of England earlier this month for being "too slow" to boost interest rates and promised to reassess its mandate. Suella Braverman, the attorney general and one of her most ardent supporters, claimed that Ms. Truss was dubious if the Bank of England was "fit for purpose."

She continued, echoing Ms. Truss' complaints of the BoE, saying: "The Bank of England has been too slow in this regard and interest rates should have been raised a long time ago."

Liz Truss has stated that she wants to review the Bank of England's mandate, thus Ms. Braverman explained that the assessment will entail examining the Bank of England's operations in great detail to determine whether its exclusive independence over interest rates is actually appropriate.



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