In the event of a regulatory failure due to the Financial Conduct Authority's actions, what must the FCA report to?

The correct answer is that the Financial Conduct Authority (FCA) must report to the Treasury in the event of a regulatory failure. The Treasury is responsible for overseeing the financial system and ensuring its stability and integrity, which includes the actions of the FCA. The requirement for the FCA to report to the Treasury allows for accountability and transparency regarding its performance and regulatory decisions.

Moreover, the relationship between the FCA and the Treasury is crucial because the Treasury sets the overall framework within which financial regulation operates. Ensuring that the Treasury is informed about regulatory failures helps maintain public confidence in the financial system and allows the government to take appropriate actions if necessary.

In contrast, while the Bank of England has a role in the financial system, its focus is more on monetary policy and financial stability rather than direct oversight of the FCA. The Prudential Regulation Authority (PRA) works alongside the FCA but serves a different regulatory function, focusing primarily on the safety and soundness of financial institutions rather than reportable failures of the FCA itself. The Competition Commission, now known as the Competition and Markets Authority (CMA), deals with competitive practices rather than direct regulatory oversight of the financial sector.