Supervision: the UK Payments Council to be regulated by HM Treasury

• The British government has decided to reform the way decisions are made on payment strategies in the United Kingdom and to amend the bank-owned self-regulation entity, the UK Payments Council. A consultation is under way until 10th October to help choosing among three options:

• Creation of a decision-making Payments Strategy Board (PSB), gathering all stakeholders, payment users included, with authority upon the UK Payments Council, under supervision of the FCA (Financial Conduct Authority, one on the two bodies replacing the FSA as of 2013);
• Amendment of the Council without new overarching authority;
• Suppression of the Council and replacement by a new entity.

• The HM Treasury argues in favour of the first option considering that it would maintain the British financial sector in its role of project development while increasing transparency and reactivity towards all payment users’ needs.  

Source: HM Treasury website

• This project is a consequence of the concerns voiced in 2009 when UK Payments Council heralded a probable phasing-out cheques in 2018 due to the continued trend of decreasing usage. This forecast was interpreted by certain consumer associations as a deliberate will to decree the end of this payment instrument.

• Whichever the final scheme, this reform is part of the overall restructuring of the financial regulation in the UK. It will result in the separation in two of the FSA next year:

• the Prudential Regulation Authority (PRA), which will be a subsidiary of the Bank of England, will be responsible for “promoting the stable and prudent operation of the financial system through regulation of all deposit-taking institutions, insurers and investment banks”;
• the Financial Conduct Authority (FCA) will be responsible for “regulation of conduct in retail, as well as wholesale, financial markets and the infrastructure that supports those markets”, as well as for “the prudential regulation of firms that do not fall under the PRA’s scope”.

• One can only question the efficiency of a regulation split into two bodies, each with a distinct parent authority. Moreover, for payments, the Treasury’s preferred option would result in as cascade of bodies.

• This multi-tiered scheme, extending decisions to all non-financial stakeholders in the payment market, is also guiding the European Commission, as it currently redrafting the EU SEPA Council’s powers with regards to (and to the detriment of) the EPC.