BBA: govt should remove FCA's redress responsibility

The recommendation came as part of the BBA's argument for a more "predictable and proportionate application of an effective regulatory framework, aligned with UK policy objectives".

Expanding, the BBA said that the current regulatory remit which covers supervision, penalty and redress can "distort incentives and create the potential for regulatory moral hazard and political influence".

According to the report, many contributors believe that an independent body responsible for redress would result in better outcomes, not only for banks but also for their customers in ensuring rigorous alignment of redress amounts with the cost of any misdeed.

The report also recommends that the government, FCA and industry take action to separate the FCA's supervision and enforcement divisions to 'increase transparency, fairness and focus' and deepen its wholesale market conduct expertise.

The report centres around reduced employment in UK banking sector. Its figures show that employment has fallen by 8% (35,000) since 2011, of which roughly a quarter has been in wholesale. Additionally, following a recovery through 2009-10, assets of the UK banking sector have contracted 12% since 2011.

The BBA argued that additional pressure arising from UK-specific policy and regulatory decisions has reduced the attractiveness of the UK as a location for international banking and hindered UK wholesale banks’ ability to compete internationally.

It said that unilateral UK regulation, such as ring-fencing, entails significant cost to some UK-based banks and extraterritorial regulation, such as EMIR, makes it harder for UK-headquartered banks to compete abroad. Also, uncertainty arising from the rapidly changing tax regime and EU referendum are inhibiting business planning and discouraging investment.

It added that the regulatory framework is not yet fully settled and will need to evolve as its impact on bank activities becomes clearer and the market changes.

The report concluded:

"A clear vision for the future of international banking in the UK and anticipation of what this will require from a legal and regulatory perspective is critical. Once the vision is established, all government departments will need to take a joined up approach to implementing it."