Under the Financial Services bill, the Financial Conduct Authority and PRA will have the power to publish notices of firms or individuals under investigation for enforcement action.
Critics argue that such as move will pre-judge an investigation and could cause unfair damage to a firm or individual’s reputation.
The Government has made two concessions to temper the use of early warning notices by retaining a reserve right to remove the power if it is not in the public interest.
It is also insisting that the FCA has an “independent” process for giving out notices through a judicial independent body such as the regulatory decisions committee.
But the Government has nothing similar in place for the PRA, claiming it will not be awarding notices. The bill is currently being ratified by the House of Commons after passing through the House of Lords with a number of amendments.
Tory peer Lord Howard Flight says: “For the FCA I rest content but what about the PRA? The answer I have been given is that the Government does not think the PRA is going to issue warning notices therefore it has not done anything about it.
“It is not satisfactory because if the PRA finds a bank has been running itself outrageously then it will issue a warning notice.”
Tory peer Lord Robin Hodgson says there is a danger of “mission creep” that sees the PRA start to award warning notices despite the Government’s current position.
He says: “When you are judge and jury, as the regulator is, then you need to make sure there is appropriate checks and balances otherwise it is Kafkaesque.
“We have made some progress but we are not out of the woods and serious work needs to be done about it. Mission creep is always a problem.”