An influential group of peers have hit out at the government for ditching the Lords’ oversight of financial watchdogs as part of legislation passed in the King’s Speech.

Writing in her capacity as chair of the Lords’ Financial Services Regulation Committee, Baroness Noakes said the government had “eliminated” an “integral” part of the regulatory system.

The UK’s financial watchdogs have the power to set the rules, but do so following “regulatory principles” set out by Parliament. But regulators are required to report to Parliamentary committees as part of accountability measures.

The Financial Services and Markets Bill saw the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) stripped of this responsibility, with the removal of the rule that forces them to explain actions to committees.

Baroness Noakes said: “The [Financial Services Regulation Committee] will no longer be able to do the job that… parliamentary resolutions require of it.”

She added it “renders the committee’s work ineffective” and whilst it “may not have been the government’s intention, it is a matter of concern”.

Lords’ long-running call to beef up growth agenda

The letter – penned to investment minister Lord Stockwood – calls for the government to discuss the changes with the group of peers. The Financial Services Bill is currently in the committee stage of the House of Lords after passing its first two readings. 

The Treasury has been contacted for comment.

The committee has been a vocal critic of the government’s growth agenda and called for major reform to bolster efforts. 

It previously scolded the FCA and PRA for lacking a “clear understanding of the cumulative burden of regulation”.

The growth mandate regulators operate under was first enshrined in the Financial Services and Markets Act in 2023. Rachel Reeves has sought to ramp up these efforts with a call to arms for the nation’s watchdogs to “regulate for growth”.

A new Regulating for Growth Bill debuted in the King’s Speech in May took aim at the “lack of agility and responsiveness to innovation”. 

It handed ministers a new “statutory power” to give regulators strategic steering, allowing the government to define “what growth means in different regulatory contexts”.

The financial services bill also confirmed the long-awaited reforms to the banking industry’s ring-fencing regime, which requires major lenders to keep retail and investment banking activities separate.