Watching the watch dogs

The U.K. Treasury is reviewing whether the country’s two finance regulators are doing enough to hold wrongdoers to account.

The government will examine the effectiveness of the processes at the Prudential Regulation Authority and the Financial Conduct Authority for referring cases for enforcement investigations, the Treasury in London said in a statement today. It will also look at the processes for coordinating their work, reaching disciplinary decisions, allowing suspects to settle early and referring cases to a finance tribunal.

“For enforcement action to be effective, wrongdoers must believe that they face a real and tangible risk of being held to account and must expect to face meaningful and proportionate sanctions,” the Treasury said.

Most U.K. enforcement cases are handled by the FCA, whose fines have risen to 432.2 million pounds ($734 million) for the fiscal year ending in 2013 from 33.6 million pounds in the year that ended in 2010. The PRA mostly outsources to the FCA and has never completed an enforcement case, according to the Treasury.

The review is seeking input from the industry on issues including whether those under investigation are given adequate opportunity to respond to allegations by the regulator and whether the FCA’s use of an internal tribunal for decision- making is fair.

Chris Hamilton, a spokesman for the FCA, declined to comment. Sarah Bailey, a spokeswoman for the PRA, didn’t immediately respond to a request for comment.

The findings will be reported to Chancellor of the Exchequer George Osborne in the fall.


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