3.1 In a modern democracy, individuals and businesses rightly expect public bodies that exercise important regulatory functions to be accountable for their actions. In many cases, such regulatory functions will be exercised by government departments (usually through the development and implementation of legislation), which are led by elected politicians who are directly accountable to Parliament and ultimately to the electorate. In the UK there are well established mechanisms for Parliament to hold government Ministers to account.

3.2 In many areas of public policy, important regulatory functions are delegated to public bodies which are not led by elected politicians and which operate with some degree of independence from government. Financial services regulation is such an area, where many countries have delegated important responsibilities to regulators that operate independently from government. This approach has been a feature of the UK financial services regulatory framework for almost 40 years.

3.3 While the government thinks this is the most effective approach to the regulation of financial services, for the reasons set out in the previous chapter, it raises important issues around how regulators should be accountable, both to elected politicians and to the general public. The government thinks that existing accountability arrangements for UK financial services regulators have operated effectively for many years. But accountability of the regulators will take on greater importance when their responsibilities expand as a consequence of leaving the EU and under the proposals set out in this consultation. Accountability, scrutiny and public engagement with the work of the regulators is therefore a particularly important theme of this review.