The committee asked Davies whether the government or the regulators would be leading the conversation in identifying and making these trade-offs.
“I broadly think that he is right to say that the existence of these new duties or parallel duties does require them to make some trade-offs. The question, though, is sort of predicating the assumption that you've got this growth and competitiveness objective,” he said.
“It’s probably helpful at the start, although it may not be helpful for your inquiry, to say 'I don't think it's a good idea to have this' because you risk the cross eyed controller phenomenon, where the regulators have got too many things to aim at and therefore end up aiming at none of them in particular.”
He argued that it gives the impression that regulation can do more for competitiveness and growth than Davies believes it can do.
“It ignores the observation that most of the things that I would regard as difficult from a regulatory point of view - in other words - difficult for firms over the last 10 years or so, have actually come from parliament rather than from the regulators.
“So the cynic in me says, well, this is a fine thing, parliament has legislated a lot of very inconvenient things from a financial sector point of view, and now says, what a terrible mess it is, and therefore the regulators must sort it out by paying more attention to growth and competitiveness.”
When it comes to whether it is the duty of the ministers or the regulators, Davies argued that the answer to that is an empirical one.
This is because there are certain things where the regulators clearly have to make judgments, but in other areas such as the consumer duty, if that were to be needed to be softened in some way, then parliament would have to do something about it.
“Another example would be ring fencing, which is in primary legislation, and the regulators cannot, on their own, remove the tiresome aspects of ring fencing,” he said.
“It's a question which is capable of a rather detailed answer. You just have to look place by place, and say, is that in the regulators gift, or is it in parliament's gift? And the answer varies depending on what you're looking at.”
sonia.rach@ft.com
