Financial services
Reforming UK financial regulation
The Government believes that the current system of financial regulation has key weaknesses, and has set out proposals to replace this with a new regulatory framework.
At present, no single institution has the responsibility, authority and tools to monitor the financial system as a whole, and respond accordingly. That power will now be given to the Bank of England.
The Government will create a new Financial Policy Committee (FPC) within the Bank, which will look at the wider economic and financial risks to the stability of the system. In advance of the passage of legislation, an interim FPC has been established by the Treasury and the Bank. This body will undertake, as far as possible before formal legal powers are created, the FPC’s role of identifying and monitoring risks to the financial system as a whole.
The reforms will also introduce greater judgement and focus to regulation of financial firms. The Financial Services Authority (FSA) will cease to exist in its current form, and the Government will create two new focused financial regulators:
- A new Prudential Regulation Authority (PRA) will be responsible for the day-to-day supervision of financial institutions that manage significant risk on their balance sheet. It will adopt a more judgement-focused approach to regulation so that business models can be challenged, risks identified and action taken to preserve financial stability.
- An independent conduct of business regulator, the Financial Conduct Authority (FCA), will take a tough approach to regulating how firms conduct their business. It will have a strong mandate for promoting confidence and transparency in financial services and to give greater protection for consumers of financial services. It will also have a strong role in promoting competition.
The Financial Services Bill was introduced to Parliament on the 26th January 2012, marking a key milestone in the regulatory reform agenda. The Bill provides the legislative framework for the reforms set out above. Further information can be in the Financial Services section of tis website.
Financial regulation consultations
The Government has carried out three consultations on the proposals brought forward in this Bill. Links to these can be found below.
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