187/99
9 November 1999
COMPETITION AND REGULATION IN FINANCIAL
SERVICES MARKETS
Don Cruickshank today welcomed the Government's response to his Banking Review Team interim report, 'Competition and Regulation in Financial Services: Striking the Right Balance', published on 22 July.
Commenting on Economic Secretary Melanie Johnson's announcement of the Government response to recommendations in his interim report, he said:
"I welcome the changes the Government proposes to make to the Bill to ensure that markets in financial services are subject to effective competition scrutiny, and that the right balance is struck between the FSA's regulatory objectives and effective competition.
"I made six, quite detailed, recommendations in my Interim Report. For five of them the Government's proposed changes to the Bill meet the substance of my recommendations. In its proposals for external scrutiny the Government has gone further, and proposed a reporting procedure which will make the FSA's assessment of competition transparent.
"My sixth recommendation was that the FSA should be responsible for making the trade off between regulatory and competition outcomes in financial services. I proposed that this should be achieved by giving the FSA a primary competition objective to minimise the anti-competitive effects of its regulatory activity.
"The Government believes that this outcome can be achieved without giving the FSA a primary competition objective in addition to its regulatory objectives. My concern has always been that the outcome should be as Ministers intend. I am not wedded to any particular means of achieving this, and I will welcome any changes to the Bill which deliver the outcome in practice."
"Work on the review of banking services is continuing and I look forward to reporting to the Chancellor early next year."
NOTES TO EDITORS
Chancellor of the Exchequer, Gordon Brown, announced the setting up of the banking review in his Pre-Budget report on 3 November 1998. Its terms of reference are to:
- examine the banking sector in the UK, excluding investment banking;
- examine the levels of innovation, competition and efficiency in various sub-markets, including SMEs;
- look at how these levels compare with international standards;
- consider whether there are options for change which the industry or Government should consider.
The review is being undertaken by a team of Treasury officials under Mr Cruickshank's direction, and calls on the advice of outside experts.
On 13 April 1999 Mr Cruickshank announced that electronic commerce and money transmission issues would be added to the scope of the review, in response to consultation.
The Banking Review Team's interim report, 'Competition and Regulation in Financial Services: Striking the Right Balance', was published on 22 July 1999. The interim report, the initial consultation document, responses to it, and banking review press releases are available on the Bank Review website .
Mr Cruickshank was Managing Director of the Virgin Group Plc (1984-89); Chief Executive of the NHS in Scotland (1989-93); and Director-General of OFTEL (1993-98). He is Chairman of the Government's Action 2000 Millennium Bug campaign and Chairman of Scottish Media Group plc.