Conference on the role of financial regulation in international competitiveness and economic growth

About the conference

Date: 19 September 2023
Location: Prudential Regulation Authority

The Financial Services and Markets Act (FSMA) 2023 received Royal Assent on 29 June 2023. In part, it repeals retained EU law in financial services and gives the Prudential Regulation Authority (PRA) additional responsibilities and wider rule making powers. Under FSMA 2023, the PRA’s primary objective (ensuring the safety and soundness of banks and insurers) remains the same; however, alongside the current secondary objective to facilitate competition, the PRA has been given a new secondary objective which requires the PRA to act, when it can, to facilitate the UK economy’s international competitiveness and its growth over the medium to long term, subject to alignment with international standards. 

To date, the contribution of prudential regulation to international competitiveness and growth has not been a focus of research in academia or the regulatory community. The PRA is committed to be proactive in its approach to implementing the new secondary objective, including looking for specific ways to pursue it.1 As part of this proactive approach, the PRA hosted a major international conference on 19 September 2023 to develop a deeper understanding of the core linkages and relationships, which will enable it to better implement the objective.  

Topics covered at the conference included:

• What determines the contribution of finance to growth and international competitiveness of an economy?
• What makes for a successful global financial centre, and how does it retain competitive advantage? 
• How to measure the contribution of financial services to the economy?
• How to measure the contribution of prudential regulation to the competitiveness and growth of the economy?

Full agenda

The conference brought practitioners, regulators, academics and other stakeholders together to develop and deepen the understanding of, consider opportunities for, and discuss issues surrounding facilitating the UK’s international competitiveness and growth when making policy. It also provided an opportunity to discuss and explore the PRA’s proactive approach to implementing the new objective. Another important focus of the conference was on how the PRA can be held to account against the new objective. The conference summary outlines the main points raised by speakers at the event.

To support conference content and inform ongoing work on developing appropriate metrics, the PRA ran a pilot survey to gather feedback on the extent to which the PRA’s regulatory framework is advancing the new objective and how the PRA can further facilitate its implementation in the future. The survey was sent to all conference invitees and responses were collected between 18 May and 30 June 2023. The PRA received responses from a broad range of stakeholders, including regulated firms, investors, advisors, regulators, civil society, and the academic community. Results from the survey were discussed during the conference and they have been published as part of Victoria Saporta's conference speech - Competitiveness and growth: continuing the conversation. 

In addition, PRA staff prepared two working papers to serve as background to the conference discussions.  

• Background paper 1 - How to measure the contribution of prudential regulation to competitiveness and growth – covers the subject of metrics. This paper sets out PRA’s staff initial perspectives on the design of a set of quantitative information which can be used to show the PRA's progress against the new objective. The paper presents a set of potential metrics (over which the PRA has direct control), highlighting their respective pros and cons.
• Background paper 2 – The links between prudential regulation, competitiveness and growth - sets out PRA staff’s current thinking around the interpretation of the new objective, supported by a literature review and PRA staff’s own empirical evidence (as well as highlighting where there are research gaps in the literature). 

¹ Bank of England DP4/22 ‘The Prudential Regulation Authority’s approach to policy’, September 2022.