Baringa is pleased to have supported UK Finance in its detailed response to HM Treasury (HMT)'s phase-II consultation on its financial services future regulatory framework review. Our contribution to this response was a review of how financial services regulators measure and report on their performance, and how this might be enhanced. This is particularly important in light of HMT's proposals to hand the regulators new powers, including competences previously reserved to EU institutions.

We identified many areas of good practice in the way that regulators measure and report on their own performance. These include engagement of agents? roundtables by the Prudential Regulation Authority (PRA) and Britain Thinks surveys by the Financial Conduct Authority (FCA) and the Payments Systems Regulator (PSR), as well as the publication of annual reports and industry consultation.

However, we also identified a number of ways in which to enhance how regulators measure their performance. In particular, a number of our recommendations relate to the idea that regulators could better measure how they contribute to the overarching landscape of regulation, rather than focus on their own performance in isolation. We refer to this as ?pan-regulator? performance measurement and reporting.

It is our view that the impact of regulation issued by a single regulator in delivering real outcomes cannot truly be understood by assessing single instances of policy change. It is also unhelpful for those holding regulators to account to know only whether individual policies meet short-term goals. What should also be considered is the impact regulation as a whole has on market and customer outcomes. To achieve this, at some point (e.g. annually, or on a three-year cycle) pan-regulator performance should be measured to understand if the landscape of supervision and policy implementation is having a positive impact on the way financial services deliver value.

The added attraction of this recommendation is that it promotes consideration not only of the benefits of active intervention (e.g. policy change) but also the benefits of non-intervention. In other words, it encourages regulators to balance the potential positives of policy change against the potential risks of continual regulatory change.

Our report also considers the ways in which such pan-regulator performance might be considered. We posit that there is scope to expand the newly established Regulatory Initiatives Forum to set a framework for, and oversee this type of, pan-regulator performance reporting.

While the measurement and reporting of regulator performance is inherently complex, we believe that the recommendations outlined in our paper, and in particular consideration of measuring the aggregate performance of regulators in financial services, could make a material contribution to ensuring that regulators are empowered to make the best decisions to support firms and consumers.

Free webinar: Regulatory Framework Review, 15 March

As part of our Regulatory Roadmap series, join Matthew Conway, Director, Strategy & Policy at UK Finance who will be chairing an expert panel, including Bim Afolami MP, Chair, APPG on Financial Markets and Services, and Baroness Bowles of Berkhamsted discussing the Regulatory Framework Review and its implications across the financial services landscape.

Register here.