The review, which begins with a call for evidence, will report to the Chancellor in the autumn and be laid in Parliament.
It seeks views on whether current arrangements and processes support the fair and effective use of enforcement powers.
The regulators’ enforcement powers are wide ranging and include the power to fine firms and individuals and the power to ban individuals from operating in the financial services industry.
The regulators have considerable flexibility within broad statutory parameters to design their respective administrative processes to support the exercise of these powers.
The review continues the government’s focus on strengthening accountability in the financial services industry.
The government has already taken tough and decisive action to stop inappropriate behaviour in the industry and to ensure wrongdoers are held to account, including bringing the setting of LIBOR under the scope of regulation and making misleading statements in relation to LIBOR a criminal offence; and legislating for a tougher approval regime for senior bankers with the threat of jail if their actions are proven to be reckless and lead to the failure of the bank they manage.
For enforcement action to be effective, wrongdoers must believe that they face a real and tangible risk of being held to account and must expect to face meaningful and proportionate sanctions. The general public must also have confidence that wrongdoers will be subject to sanctions and that the enforcement machinery will be robust enough to deliver those sanctions when wrongdoing occurs.
The review will therefore consider whether the regulators’ institutional arrangements and processes for enforcement decision making strike an appropriate balance between fairness, transparency speed and efficiency.
George Osborne, said: “The government has taken action to provide a welcoming business environment for those in the financial services industry who play by the rules whilst ensuring that those intent on breaking them are held to account.
“I am committed to ensuring that the financial services regulators pursue a model of enforcement that delivers the appropriate balance of fairness, transparency, speed and efficiency."