The Treasury Select Committee has said there are opportunities to boost competitiveness through regulatory reform.

But its new report on the future of financial services regulation warned against any inappropriate weakening of the UK’s strong regulatory standards.

Committee chair and MP Mel Stride says: “The financial services sector is at a turning point, with regulators taking on new powers following the UK’s exit from the EU.

“While it is vital that regulators are not leant on to inappropriately water down regulations, and the committee will remain vigilant in this area, there are likely to be real opportunities to lessen regulatory burdens without weakening standards.

“It is also important that the regulators have an objective to promote growth, not just for the financial services sector, but for the wider economy.”

In the report, the MPs have reaffirmed their commitment to regulatory independence.

They warned they will remain alert for any evidence that regulators are coming under undue pressure from the Treasury to inappropriately weaken standards.

The committee wants to see the regulators take the importance of growing the economy into account.

It recommends that the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) should each be given a secondary objective to promote long-term economic growth.

This objective should reflect the ways in which financial services facilitate economic growth.

That could be by providing capital, credit and insurance to firms outside of the financial services sector.

The committee also recommended that the FCA should have regard for financial inclusion in its rule-making.

The FCA should also consider how to improve its engagement with the poorest consumers. Therefore, the regulator should seek data on the issues vulnerable consumers experience directly.

Yet MPs highlighted that regulators should not be carrying out social policy, or filling the gaps “where the government ought to be stepping in”.

The committee also encourages the FCA to investigate whether there are opportunities for larger firms to be more experimental with innovative products.

That could be by setting aside additional capital to compensate consumers if new products turn out not to benefit consumers as anticipated.

Treasury Select Committee views on the future overall direction of financial services regulation:

• Given the UK has historically exercised significant influence in the framing of EU regulations, Brexit should not in itself be the cause of instant or dramatic changes to financial services regulation in the UK. Nevertheless, there will be opportunities to tailor inherited EU regulations to the UK market, and to seek opportunities for simplification, while being mindful of continued compliance with global standards.
• The Treasury should respect the principle of regulatory independence, and must not pressure the regulators to weaken or water down regulatory standards, or to accept changes to the regulatory framework which could impede the regulators’ ability to achieve their primary objectives.
• The committee will remain alert for any evidence that regulators are coming under undue pressure from the Treasury to inappropriately weaken regulatory standards.