A new approach to UK financial regulation

Services & Sectors > Practice Areas > Financial Services Regulatory > UK Regulatory Reform

A comprehensive list of the proposals and consultations on regulatory reform in the UK

Reform of the regulation of the financial services sector was inevitable following the global financial crisis. These reforms are occurring on a global scale. This page is designed to keep you up to date on the latest proposals and commentary relating to the new approach to financial regulation in an easy to follow reference guide.

Useful links

Latest consultations and commentary
3 April 2013: FSCS publishes memorandum of understanding between FCA and FSCS The Financial Services Compensation Scheme (FSCS) has published a memorandum of understanding outlining a framework agreed between the FCA and the FSCS in respect of their cooperation. Among other things, the MoU covers the following topics: Information sharing. Confidentiality. Policy making. Funding, levying and treasury management. Co-ordination between the FCA and PRA. Reporting to the FCA. Disaster recovery. Reviewing the memorandum Click here to view the memorandum of understanding.
2 April 2013: PRA publishes non-Handbook guidance as supervisory statements The PRA has published non-Handbook guidance in the form of supervisory statements. The guidance was originally published by the FSA and has been adopted by the PRA. The purpose of the statements is to help firms understand the rationale underpinning the PRA's rules. The supervisory statements in respect of banking policy can be found here. The supervisory statements in respect of insurance policy can be found here.
2 April 2013: PRA publishes policy statement on approach to enforcement The PRA has published a policy statement including its final statements on policy for its procedure, decision-making and disciplinary and enforcement powers. As appendices, the policy statement includes statements on: statutory notices and the allocation of decision-making; the imposition and amount of financial penalties; the imposition of suspensions or restrictions and the period for which they are to have effect; the PRA’s settlement decision-making procedure and policy for the determination of the amount of penalties and the period of suspensions or restrictions in settled cases; the PRA’s approach to publicity of regulatory action; the conduct of interviews. Click here to view the policy statement.
2 April 2013: FCA publishes memorandum of understanding between FCA and OFT The FCA has published a memorandum of understanding intended to establish a framework of co-operation between itself and the Office of Fair Trading (OFT). The memorandum sets out the role of each organisation and how they will work together. It replaces the previous memorandum of understanding that was in place between the FSA and the OFT. Click here to view the memorandum of understanding.
1 April 2013: Bank of England publishes updated approach document, policy statement on financial penalties and summary of responses in respect of financial market infrastructures The Bank of England (BoE) has published a revised approach document on the supervision of financial market infrastructures (FMIs). FMIs comprise Recognised Clearing Houses (RCHs), recognised payment systems (RPSs) and settlement systems. Although the BoE already supervised RPSs, it assumed supervisory responsibility for RCHs and settlement systems on 1 April 2013. The BoE has also published a summary of responses to its consultations relating to its new supervisory role for FMIs. Finally, the BoE has published a policy statement on imposing financial penalties on FMIs. Click here to view the revised approach document. Click here to view the summary of responses. Click here to view the policy statement on financial penalties.
1 April 2013: PRA publishes updated approach documents on insurance supervision and banking The PRA has revised its approach documents on insurance supervision and banking. The insurance approach document sets out how the PRA carries out the role in respect of insurers and the banking approach document sets out the role in respect of deposit-takers and designated investment firms. Issues addressed in the approach documents include: The PRA's risk framework; Risk management and controls; The PRA's expectations on firms mitigating their risks; The PRA's approach to supervision, including enforcement powers; and The Proactive Intervention Framework (PIF). Click here to view the insurance supervision approach document. Click here to view the banking supervision approach document.
1 April 2013: Bank of England issues PRA and Bank of England policy statements on powers of direction over qualifying parent undertakings The Bank of England (BoE) has published a policy statement for each of the Prudential Regulation Authority (PRA) and the BoE containing each regulator's position on the power of direction over qualifying parent undertakings. The Financial Services Act 2012 introduces a new Part 12A and a new Schedule 17A to the Financial Services and Markets Act 2000. For the PRA, this provides powers of direction over certain unregulated parent undertakings (qualifying parent undertakings) which control and exert influence over PRA-authorised firms. For the BoE, the power of direction is over qualifying parent undertakings of Recognised Clearing Houses. Click here for the PRA policy statement. Click here for the BoE policy statement.
28 March 2013: HM Treasury announces FCA board members The FSA has issued a press notice on the make-up of the board of the Financial Conduct Authority as decided by HM Treasury. The board will consist of 12 members (one chair, four executive members and 7 non-executive members) and will operate from 1 April 2013 onwards. Click here to view the notice.
27 March 2013: Bank of England publishes instruments setting rules for Recognised Clearing Houses and securities settlement system operators The Bank of England (BoE) has published instruments which implement the rules relating to Recognised Clearing Houses and those who may operate a securities settlement system. The Recognised Clearing House Rules Instrument 2013 (Bank FMI 2013/1) is made under the Financial Services and Markets Act 2000. The Uncertificated Securities Rules Instrument 2013 (Bank FMI 2013/2) is made under the Uncertificated Securities Regulations (2001/3755). The instruments come into force on 1 April 2013.
25 March 2013: FSA publishes policy statement on FCA Handbook The FSA has published a policy statement on the new Financial Conduct Authority (FCA) Handbook (PS13/5). This sets out the final amendments made to the FCA Handbook following responses to previous FSA consultations. Click here to read the policy statement.
25 March 2013: FSA and Bank of England publish policy statement on complaints against the new regulators The FSA and Bank of England have published a joint policy statement providing feedback on the responses they have received with regard to the new complaints scheme and which contains the final version of the Complaints Scheme to be implemented. Click here to read the policy statement.
25 March 2013: Bank of England publishes policy statement on PRA policy on powers to designate certain investment firms The Bank of England has published a policy statement which contains a statement of policy on how the Prudential Regulation Authority (PRA) will implement its powers to designate certain investment firms. Click here to view the policy statement.
25 March 2013: FSA publishes policy statement on FCA policy on temporary product intervention rules The FSA has published a policy statement (PS13/3), containing the final version of the Financial Conduct Authority's (FCA) statement of policy on making temporary product intervention rules. Click here to view the policy statement.
18 March 2013: FSA consults on the publication by the FCA of information on warning notices The FSA has published a consultation paper (CP13/8) containing proposals on how the Financial Conduct Authority (FCA) will publish information on warning notices under section 391(1)(c) of the Financial Services and Markets Act 2000. Click here to view the consultation.
14 March 2013: FSA publishes webpage on FCA firm classification The FSA has published a new webpage on the classification of firms by the Financial Conduct Authority (FCA). Click here to view the webpage.
6 March 2013: Bank of England publishes news release announcing appointment of PRA independent directors The Bank of England has appointed three independent directors to the board of the Prudential Regulation Authority (PRA). Click here to view the news release.
28 February 2013: Bank of England consults on proposed statutory statements of policy regarding supervision of financial market infrastructures The Bank of England has published a consultation paper on its proposed statements of policy regarding the powers over qualifying parent undertakings of UK Recognised Clearing Houses and regarding imposing financial penalties. Click here to view the consultation.
28 February 2013: Bank of England consults on proposed rules for Recognised Clearing Houses and securities settlement system operators The Bank of England has published a consultation on the rules it proposes to implement for Recognised Clearing Houses (RCHs) and securities settlement system operators when it takes over responsibility for the supervision of RCHs and operators from the FSA. Click here to view the consultation.
19 February 2013: FSA publishes "One-minute guide" to the Handbooks for the FCA and PRA The FSA has published a guide summarising the changes to the FSA Handbook that will come into effect when the two new regulatory bodies, the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA), acquire their legal powers. Click here to view the guide.
29 January 2013: HM Treasury publishes summary of responses on draft secondary legislation to the Financial Services Act and the Government response HM Treasury has published a summary of responses to consultations on the statutory instruments to be made under the Financial Services Act 2012. Click here to view the summary.
25 January 2013: FSA consults on Handbook transitional arrangements The FSA has published a consultation paper (CP13/3) on transitional arrangements for the new regulatory structure and on miscellaneous amendments to the Handbook. Click here to view the consultation.
21 January 2013: Explanatory Notes to Financial Services Act 2012 published on legislation.gov.uk HM Government has published explanatory notes to the Financial Services Act 2012 on legislation.gov.uk. The act itself was published on 20 December 2012. Click here to view the explanatory notes.
21 December 2012: Bank of England/FSA publish consultation on draft policy statement on power of direction over qualifying parent undertakings The Bank of England and FSA have published a consultation on the new powers that can be applied to 'qualifying parent undertakings', following the addition of sections 192A to 192N to the Financial Services and Markets Act 2000 (FSMA). These new sections have been introduced by The Financial Services Act 2012 and grant the Prudential Regulation Authority (PRA) some specific powers in relation to ‘qualifying parent undertakings’ which are UK-based parent companies of PRA-authorised firms within the scope of consolidated (or supplementary) supervision under EU law. There are three new powers available for all qualifying parent undertakings of PRA-authorised firms and investment firms: a power of direction; a rule-making power for information gathering; and, a supporting disciplinary power to fine or censure for breaches of a direction or information rule. The consultation sets out the context of the new powers and consults on the draft Statement of Policy on the use of the power of direction. Click here to access the consultation.
20 December 2012: FSA/Bank of England publish consultation paper on Prudential Regulation Authority The FSA and Bank of England have published joint-consultation paper CP12/39 on the proposed statutory statements of policy and procedure in relation to the PRA. Click here to read the paper.
20 December 2012: Financial Services Act 2012 is published on legislation.gov.uk On 19 December 2012 the Financial Services Bill received Royal Assent as the Financial Services Act 2012. It has now been published by HM Government on www.legislation.gov.uk. Click here to view the Act.
19 December 2012: Financial Services Bill receives Royal Assent HM Treasury have released a press release which states that the Financial Services Bill has received Royal Assent and will come into force as the Financial Services Act 2012 on 1 April 2013. The new regulatory bodies the Financial Conduct Authority (FCA), the Prudential Regulation Authority (PRA) and the Financial Policy Committee (FPC) will be launched on the same date. Click here to view the press release. Click here to view the Hansard text from the House of Lords.
18 December 2012: FSA publishes consultation paper on implementing markets powers, decision making procedures and penalty policies in the Financial Services Bill 2012-13 Consultation paper CP12/37 is part of a series of FSA papers setting out the proposed changes to regulation required to create the policies and procedures for the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA). Click here to view the consultation paper.
18 December 2012: Bank of England publishes The Bank of England (BoE) has published a document setting out its future plans for the supervision of financial market infrastructures (FMIs) following the redistribution of supervisory roles made by the Financial Services Bill 2012-13. The FS Bill will transfer responsibility for the supervision of securities settlement systems and central counterparties to the BoE from the FSA. The document sets out details of: the future regulatory regime; the key supervisory pillars; BoE supervision in practice; Policymaking, enforcement, fees, accountability, transparency and complaints; and The next steps. The BoE has also produced a draft memorandum of understanding detailing a high level framework of cooperation between the BoE, FCA and PRA on markets and market infrastructure. Click here to view the BoE approach to supervising FMIs. Click here to view the memorandum of understanding.
17 December 2012: FSA publish letter on transition to PRA The FSA has published a letter as part of a series of documents providing further information on the transition towards the Prudential Regulation Authority before the "legal cutover" on 1 April 2013. Click here to view the letter.
3 December 2012: FSA publishes consultation paper on FCA's power to make temporary product intervention rules The FSA has published paper CP12/35 which consults on when and how the Financial Conduct Authority (FCA) may make temporary product intervention rules. In it, the FSA explains the nature of some of the situations in which the FCA may choose to do this and gives examples. It also sets out the FCA’s draft Statement of Policy on making temporary product intervention rules. Click here to view the consultation paper.
29 November 2012: FSA publishes consultation paper on FCA supervision and threshold conditions regimes and statement of policy on power of direction over unregulated holding companies As part of its series of consultation papers setting out proposed changes to the regulatory requirements needed to create the new rulebooks and policies for the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA), the FSA has published a paper which sets out proposals for future FCA provisions on supervision and threshold conditions. It also includes a draft policy statement on the power of direction over unregulated holding companies. Click here to access the consultation paper.
26 October 2012: Bank of England and FSA publish consultation on draft statement of policy regarding designation of investment firms for supervision by the PRA The Bank of England and the FSA have jointly published a consultation on a draft statement of policy on the manner in which the Prudential Regulation Authority (PRA) will decide whether certain investment firms warrant prudential supervision. Under the Financial Services Bill 2012-13 the PRA will be able to designate some firms for supervision by the PRA rather than the Financial Conduct Authority (FCA). The aim of the consultation is to provide greater clarity on which to provide greater clarity on which firms (in addition to deposit-takers and insurers) will be regulated by the PRA. Click here to view the paper.
16 October 2012: FSA publishes paper 'Journey to the FCA' The FSA has published a paper detailing its viewpoint on the road to establishing the Financial Conduct Authority and the transition therein. The paper details how the FSA believes the FCA will operate once it has been established. The paper, has been previously referred to as the "FCA approach document". It picks up from the FSA's June 2011 paper on the FCA's approach to supervision. The FSA also sets out in the paper the documents that will be published before legal cutover to the FCA (referred to as Day One in the paper). Click here to view Journey to the FCA.
15 October 2012: Bank of England and FSA publish papers on the approach of the PRA towards banking and insurance supervision The Bank of England and the FSA have published two approach documents regarding PRA supervision. The first focuses on the banking sector and the other on insurance. These are follow up documents to the papers published in May and June 2011. The papers set out: the PRA’s proposed statutory objective under FSMA 2000, and its approach to advancing this objective; how the PRA will determine the focus of its supervision in identifying the key risks to its objective the measures that the PRA will expect firms and insurers to have in place to ensure their businesses are run in a safe and sound manner; detail on the PRA’s supervisory approach; the PRA's approach to setting and communicating expectations of firms and insurers; and the next steps. Click here to view the banking paper and click here to view the insurance paper.
15 October 2012: HM Treasury publishes consultation on draft secondary legislation and guidance in relation to the Financial Services Bill HM Treasury has consulted on draft secondary legislation and guidance for the Financial Services Bill 2012-13. The treasury has invited discussion on the following aspects of the new regulatory framework: the scope of regulation by the Prudential Regulation Authority (PRA); threshold conditions; regulation of mutual societies; powers of direction over unregulated parent undertakings; rule-making responsibility for the Financial Services Compensation Scheme (FSCS); and criteria designating super-complainants to the Financial Conduct Authority (FCA) Click here to view the consultation.
3 October 2012: FSA publishes consultation paper on proposals for the approved persons regimes of the PRA and FCA The FSA has published a paper which consults on a set of changes to existing regulatory rules and guidance which are necessitated by the new regime, focusing on approved persons. The paper has been prepared by the FSA in consultation with the Bank of England. Click here to view the paper.
25 September 2012: FSA speech on supervision of asset managers under the Financial Conduct Authority On 26 September 2012 the FSA published a transcript of a speech by Clive Adamson, Director of Supervision, Conduct Business Unit on the FCA approach to supervision of firms. The speech covered: how the FCA approach will differ from the FSA; changes to supervising wholesale conduct; and conduct risks for asset managers. In summary Mr Adamson said that the FCA would be a tougher and more intrusive regulator, but also a more engaged and receptive one that is more knowledgeable about the relevant sector. Click here to read the speech.
18 September 2012: FSA speech on financial promotions systems On 21 September 2012 the FSA published a transcript of a speech made by Clive Gordon, FSA head of Conduct Risk. In his speech Mr Gordon encouraged firms to review their financial promotions systems in view of the new FCA power to ban promotions. The speech covered: the regulatory framework; using digital media; problems with digital promotions; actions to consider; and new powers and the changes they will bring. Click here to read the transcript.
18 September 2012: FSA speech "How conduct regulation will be changing and how the new regulator will seek to get a fair deal for consumers" On 18 September 2012 the FSA published a speech at a conference with the Association of British Insurers by Martin Wheatley the Managing Director, of the FSA and the coming Chief Executive of the Financial Conduct Authority. Mr Wheatley outlined the way in which conduct regulation will be changing under the new structure and how the FCA will seek to achieve a fair deal for the consumer. In particular Mr Wheatley encouraged insurers to look our for the approach documents which will be published at the end of October 2012 and which will set out in finer detail the changes to regulatory operations. Mr Wheatley confirmed that the FCA will be more challenging for the insurers than the present system, but also that the more involved role the FCA will play will help spot risks to consumers before they become problems and the FCA will be faster at dealing with these. Click here to read the transcript.
18 September 2012: HM Treasury consults on macro-prudential tools for the Financial Policy Committee HM Treasury has published a consultation paper on the macro-prudential tools to be used by the Financial Policy Committee (FPC), the expert macro-prudential body to be established within the Bank of England by the Financial Services Bill 2012-13, and tasked with identifying, monitoring and addressing systemic risks to the UK financial system. The FPC will use various levers to meet its objectives: identification of risks and stresses in the Financial Stability Report; the power to make recommendations; and the power to direct action by the PRA and FCA with regard to specified macro-prudential tools. The FPC will also be able to make recommendations on a "comply or explain" basis to the regulators (the PRA and FCA); to the Treasury, within the Bank of England; and to other industry or regulatory bodies. Recommendations to the regulators can be made on a ‘comply or explain’ basis. Click here to view the paper.
13 September 2012: FSA speech "Beating the Fraudster" On 19 September 2012 the FSA published a speech by Bob Ferguson, head of Financial Crime & Intelligence at the Association of British Insurers. Mr Ferguson outlined the approach to the work against insurance fraud in the context of the new "twin peaks" system of regulation. Mr Ferguson also focussed on the government's progress in creating more effective and efficient structures to combat economic crime, with the help of the Association of British Insurers. Click here to read the transcript.
12 September 2012: FSA letter to firms detailing preparations and transitional arrangements towards the Prudential Regulation Authority The FSA has published a letter to firms outlining the preparations and transitional arrangements in the run up to the inception of the Prudential Regulation Authority (PRA). The letter highlights the upcoming publications and guidance on the transition which will be jointly published by the FSA and the Bank of England prior to the "legal cutover" expected in April 2013. Attached to the letter is a list of FAQs which contain details of important practical considerations for firms regarding supervision, authorisation and the development of the PRA handbook. Click here to view the letter and click here to view the FAQs.
12 September 2012: FSA publishes consultation paper on future Prudential Regulation Authority and Financial Conduct Authority supervision and authorisation regimes The FSA has published a consultation proposing the provisions on aspects of authorisation and supervision which will be included in the handbooks of the two new regulatory bodies to be created by the Financial Services Bill 2012-13. When the FCA and the PRA acquire their new powers, the existing provisions in the FSA handbook will either be adopted or "designated" by either or both of the new bodies to form their respective handbooks. There will also be a number of amendments to existing provisions prior to their insertion in the new handbooks. Each chapter of the paper covers a different area of the FSA handbook. Click here to view the consultation paper.
18 July 2012: HM Treasury publishes draft Threshold Conditions Order In order to assist in parliamentary consideration of the Financial Services Bill 2012-13 (the Bill), HM Treasury has published an indicative draft version of the Financial Services and Markets Act 2000 (Threshold Conditions) Order 2013, along with additional information on its website on documents supplementary to the Bill. The Bill will alter the threshold conditions applied authorised firms in order to mirror the separation of regulatory responsibilities between the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA). The draft Threshold Conditions Order sets out amendments to Schedule 6 to the Financial Services and Markets Act 200 (FSMA). Click here to view the draft order and click here to view the supplementary information on the Bill.
2 May 2012: FSA publishes draft materials on FCA product intervention powers and super-complaints process The FSA has published draft versions of the following documents relating to the role and powers of the Financial Conduct Authority (FCA) proposed under the Financial Services Bill 2010-12: Statement of policy outlining the FCA's policy on temporary product intervention rules powers, including the factors which the FCA will consider when making temporary rules and scenarios where these rules would be appropriate. An annex to the statement which analyses historical circumstances where product intervention rules might have been considered, including the sale of payment protection insurance (PPI). Guidance for consumer bodies having the power to make super-complaints to the FCA, including details of the process which the FCA will adopt after receipt of a super-complaint. The FSA has published these draft documents to assist members of the public and parliamentarians to consider these aspects of the FS Bill during its passage through parliament. Click here to view the FSA's statement on FCA product intervention and click here to read the annex to the statement. Click here to read the FSA guidance on super-complaints.
23 March 2012: Bank of England statement on policy meeting of the Financial Policy Committee The Bank of England has published a statement setting out the conclusions reached at the policy meeting of the Financial Policy Committee (FPC) held on 16 March 2012. The meeting considered the FPC's recommendations to HM Treasury on the scope of its powers in relation to several macro-prudential tools including: Countercyclical capital buffers; Sectoral capital requirements; and Leverage ratios. Click here to read the statement and here to read the minutes of the FPC meeting. These recommendations will inform the government's consultation on its proposals for the FPC's macro-prudential toolkit which will take place during the parliamentary passage of the Financial Services Bill.
22 March 2012: Financial Services Bill completes Commons committee stage The Financial Services Bill 2010-12 has completed its committee stage in the House of Commons, following the sixteenth sitting of the public bill committee for the Bill. A revised version of the Bill, showing amendments made in the committee stage, is available on the UK Parliament website. The FS Bill will now pass to the report stage in the House of Commons, which will begin on 23 April 2012. Click here to view the revised version of the Bill and click here to view Parliament's webpage on the Bill. Click here to view the official report of the sixteenth sitting of the public bill committee for the Bill.
22 March 2012: FSA business plan for 2012/13 comments on transition to the new regulatory regime The FSA has published its Business Plan for 2012/13. The plan sets out the FSA's priorities for 2012/13 and identifies the implications for the FSA's budget. Included in the plan are details of the transition to the new regulatory structure, which will involve the abolition of the FSA in its current form and the transfer of the majority of its functions to the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA). The plan explains the FSA's approach to supervision during 2012/13 when it will operate under the twin peaks structure announced by Hector Sants in his speech of 6 February 2012. This will be the FSA's last business plan before the proposed transition to the new regime in March 2013. Click here to read the business plan.
28 February 2012: British Bankers' Association briefing on draft crisis management memorandum of understanding On 28 February 2012, the British Bankers' Association (BBA) published a briefing note on the draft memorandum of understanding (MoU) on crisis management between HM Treasury, the Bank of England (BoE) and the Prudential Regulation Authority. The briefing summarises how the new MoU differs from the existing MoU between the BoE and the Treasury. In doing so, it addresses several areas of concern, including: the proposal to make the Chancellor, rather than the BoE, responsible for determining whether to utilise any bail-in capacity; and the appropriateness of using the public funds test as the means to determine whether the Chancellor should be notified of a threat to financial stability. Click here to read the BBA's briefing note.
27 February 2012: The PRA's approach to consultation On 27 February 2012, the Bank of England and the FSA published a guidance note clarifying the proposed approach to consultation which will be taken by the Prudential Regulation Authority (PRA). The note addresses a number of points, including that: the more complex the issue, the earlier the PRA will seek to engage; the PRA will seek to maintain regular senior level contact with the firms it regulates; the PRA will obtain detailed technical feedback from expert practitioners on the various available methods of achieving its objectives. Click here to read the note.
27 February 2012: Treasury Committee responds to the Government's response to the Committee's report on the FCA On 27 February 2012, the House of Commons Treasury Committee published its formal response to the Government's response to the Committee's January 2012 report on the FCA. The report addresses issues relating to the FCA's strategic and operational objectives, particularly with regard to the FCA's proposed duty to promote competition in the interests of consumers. Click here to read the Committee's response.
23 February 2012: Tracey McDermott speech on the FSA and FCA's investigation and enforcement regimes On 23 February 2012, the FSA published a speech made by Tracey McDermott, the FSA's Acting Director of Enforcement and Financial Crime, on the FSA and FCA's approach to investigation and enforcement. In particular, the speech highlighted the areas in which the FCA's methods of enforcement would differ from the current FSA regime, notably with regard to the FCA's product intervention powers. Click here to read the speech.
22 February 2012: Treasury publishes consolidated version of FSMA reflecting the proposed revisions under Financial Services Bill HM Treasury has published a consolidated version of the Financial Services and Markets Act 2000 (FSMA), which reflects how FSMA will be amended by the latest draft of the Financial Services Bill which was introduced to Parliament on 26 January 2012. The Treasury's Financial Services Bill webpage clarifies how the latest consolidated version of FSMA differs from the version which it published on 6 September 2011. Click here to view the consolidated version of the Bill, or here for the Treasury's Financial Services Bill webpage.
22 February 2012: Draft memorandum of understanding between the FCA and the Financial Ombudsman Service On 22 February 2012, the Financial Ombudsman Service (FOS) published a draft memorandum of understanding (MoU) between the FOS and the FCA. The MoU details the framework under which the FOS and the FCA will co-operate and communicate to facilitate the effective functioning of the conduct regulation and dispute resolution regimes under the Financial Services and Markets Act 2000 (FSMA). In particular, the MoU addresses: the respective roles of the FOS and the FCA under FSMA; the FOS and FCA's statutory obligations; issues of governance; the sharing of information between the FOS and the FCA. Click here to read the memorandum of understanding.
6 February 2012: FSA to operate the new system internally from 2 April 2012 Hector Sants announced on 6 February 2012 that the new "twin peaks" regime will be put in place at the FSA from 2 April 2012. This step is to ensure a seamless transition once the new regime comes into effect in early 2013. Mr Sants commented that the FSA could not replicate the new system exactly, but that it would go as far as possible. This will mean that from 2 April 2012, banks, building societies, insurers and major investment banks will have two separate supervision teams at the FSA: one for prudential regulation and the other for conduct regulation. All other firms will have one team supervising both, as is presently the case. The move will also see a step towards more "judgement-led" supervision. The FSA's new team will be encouraged to make judgements on new products and a firm's risk profile. It will also be a chance to see how the two teams will co-operate with each other and whether they can prevent duplication in regulatory data collection. Click here to read the FSA's press release, or click here for the speech by Hector Sants."
27 January 2012: Financial Services Bill published The Financial Services Bill was published on 27 January 2012. Key changes include significant amendments to crisis management arrangements between the Treasury and the Bank of England, and the decision to transfer consumer credit regulation to the new Financial Conduct Authority. This is not the final Act and the Bill is expected to have its second reading in the House of Commons on 6 February 2012. The new system of financial regulation is expected to come into effect from 2013. Click here to view the draft Financial Services Bill and the explanatory notes.
27 January 2012: A new approach to financial regulation: securing stability, protecting consumers The Treasury has published a policy document alongside the Financial Services Bill (above). This document sets out the changes made to the previous draft Bill and the reasons for them. It also contains the Government's responses to the Joint Committee and Treasury Committee's reports. Click here to view the Treasury's policy document.
25 January 2012: Speech by Clive Adamson on the FCA's approach to supervision This speech was delivered by Clive Adamson, the Director of Supervision at the Conduct Business Unit of the FSA, to the British Bankers' Association Conference. Mr Adamson summarises the approach to supervision which will be taken by the Financial Conduct Authority (FCA), including: a shift from a primarily reactive to a pre-emptive strategy of retail supervision; a new firm-assessment framework which will replace ARROW and promote better regulatory practice by facilitating communication between the FCA and firm management; an increased focus on thematic supervision; and a greater emphasis on wholesale conduct. In addition to discussing the supervisory approach of the FCA, Mr Adamson also discusses the proposed transition from the FSA to the FCA. To view the full speech, click here.
23 January 2012: Treasury Committee's response to Bank of England's report on accountability Following from its press release below, the Treasury Committee considers the Oversight Committee proposed by the Bank "could not be relied upon to provide adequate scrutiny". The Committee also suggests much of the detail should be set out in the Financial Services Bill, which is due to be published by the end of January 2012. Click here for the Treasury Committee’s report.
17 January 2012: Treasury Committee says the Bank of England has not gone far enough In a press release published alongside the Bank of England's response to the Treasury Committee's report on accountability of the Bank, the Committee said: "Whilst supporting some of the Committee’s recommendations, on several key points the Court of the Bank of England falls short of what is needed." Click here for the Treasury Committee’s press release.
17 January 2012: Bank of England responds to Treasury Committee’s report on accountability The Bank of England recognises that its new role in ensuring financial stability in the UK regulatory system will come with increased accountability to Parliament. The Bank intends to create an Oversight Committee made up of non-executive directors, which will have access to papers and policy making processes within the Bank, and the power to commission external reviews into the Bank’s performance. Click here for the Bank of England’s response
13 January 2012: Treasury Committee publishes report on accountability of the FCA The Treasury Committee has published its report on the Financial Conduct Authority (FCA). A recurring message is that the FCA’s role has become too complex. It has gone from a single, overarching objective, to a strategic objective which sits alongside three operational objectives. Some of the recommendations include: The FCA should have an explicit competition objective The Government should remove the FCA's strategic objective Re-examining the retail and wholesale consumer distinction The current proposals do not provide adequate accountability There is no need for a veto to the FCA’s powers Click here to see the Treasury Committee’s report.
20 December 2011: Discussion paper on instruments of macro prudential policy The Bank of England launched a discussion paper on 20 December 2011 regarding the tools it may use to carry out the Financial Policy Committee's objectives under the new regime. The FPC will be responsible for tackling sources of systemic risk. The paper identifies three broad categories in which the FPC believes it should have the power to direct a firm (or firms) to take a particular course of action, they include: a firm's balance sheet; the terms and conditions of transactions in particular financial markets; and market structures. The paper asks if the FPC is focussing on the right areas, and whether it should consider any other tools which could prevent a future systemic risk. Click here for the press release which contains a link to the full paper.
19 December 2011: Government publishes its response to the ICB's final report The Government has published its response to the report by the Independent Commission on Banking (ICB), which sets out plans to fundamentally reform the structure of banking in the UK. The Government agrees with the ICB’s recommendations and outlines how it will legislate to create a stable banking sector, and removes the implicit taxpayer guarantee in the event of a bank failure. The Government will implement the ICB’s advice in stages with the full package of reforms completed by 2019. Click here for the Government's response to the ICB's report.
23 September 2011 - FSA response to Financial Services Bill consultation On 23 September 2011 the FSA published its response to the call for evidence by the Joint Committee of the House of Commons and House of Lords for pre-legislative scrutiny of the draft Financial Services Bill. The FSA examines areas requiring clarification such as the co-ordination between the Prudential Regulatory Authority and the Financial Conduct Authority. See this link for more information.
15 September 2011 - Collated responses to Financial Services Bill consultation On 15 September the Joint Committee of the House of Commons and House of Lords for pre-legislative scrutiny of the draft Financial Services Bill published the responses it has received to the consultation. See this link for more information.
15 September 2011 - Extension of pre-legislative scrutiny timeframe for Financial Services Bill On 15 September Parliament extended the pre-legislative scrutiny timeframe for Financial Services Bill to 16 December 2011. See this link for more information.
15 September 2011 - Terms of Reference for the FCA accountability inquiry On 15 September 2011 the House of Commons Treasury Committee announced its proposed Terms of Reference for its inquiry into FCA accountability. The Committee has asked for written submissions to be submitted by 10 October 2011. See this link for more information
12 September 2011: Independent Commission on Banking publishes final report The Independent Commission on Banking has published its final report setting out its conclusions and recommendations for the structural reform and long-term stabilisation of UK banks. The report contains recommendations on ring-fencing retail banking operations, loss absorbency and increasing competition. Click here for the full text of the ICB report.
6 September 2011: Revised consolidated version of Financial Services and Markets Act 2000 On 6 September 2011, HM Treasury published an update to the consolidated version of FSMA on its website. The Treasury originally published this consolidated version of FSMA on 5 July 2011. The consolidated text is for reference only and to aide pre-legislative scrutiny of the draft legislation. It will help readers see the changes the new proposals will make to FSMA. To view the consolidated version of FSMA, please click here.
18 August 2011: TSC announce inquiry into the accountability of the FCA On 18 August 2011, the Treasury Select Committee announced an inquiry into the accountability of the Financial Conduct Authority under the UK's new regulatory system. The Chairman, Andrew Tyrie, said the inquiry is a "golden opportunity" to review the accountability of the FCA to consumers, industry practitioners and Parliament. The inquiry is expected to focus on conduct of business regulation which many perceive to have been ineffective and costly under the FSA, according to the press release. To view the press release, please click here.
22 July 2011: Joint Committee call for evidence on the Financial Services Bill The joint committee of the House of Lords and Commons who will conduct the pre-legislative scrutiny of the draft Financial Services Bill was approved by Parliament on 20 July 2011. The committee immediately launched a call for evidence containing 22 questions about the Financial Services Bill and the regulatory reforms in the UK. Written submissions to the call for evidence should be sent by 2 September 2011. To view the call for evidence and the questions, please click here.
5 July 2011: Consolidated version of the Financial Services and Markets Act 2000 As mentioned in the Blueprint for Reform, the Treasury has published a consolidated version of the Financial Services and Markets Act 2000 (FSMA). This consolidated text is for reference only and to aide pre-legislative scrutiny of the draft legislation. It will help readers see the changes the new proposals will make to FSMA. [Please note that HM Treasury have since published an updated version of this document on 6 September 2011, the previous version is no longer available and the link below is to the latest version.] To view the consolidated version of FSMA, please click here.
29 June 2011: Speech by Hector Sants: The future of banking regulation in the UK This speech was delivered at the British Bankers Association (BBA) Annual Conference and focuses on banking regulation. Hector Sants provides an overview of the approach the new regulatory authorities will take to banking regulation (with more detail in the publications below). Hector Sants says that firms need to change their behaviour and conduct and refers to the large amounts of consumer redress paid out by the industry as "unacceptable". The FCA will have an "enhanced competition mandate" which includes making judgements on pricing issues where they relate to fairness, something traditionally left to the Office of Fair Trading. The PRA will adopt firm-specific supervision and utilise tools to minimise the effect of a firm failure, rather than trying to prevent failures altogether. ARROW visits will be replaced with a new simplified framework for assessing risks posed by firms. This will focus on the potential impact of the firm's failure, the firm's business model and risk to the wider system and the firm's overall safety and soundness. To view the full speech, please click here.
28 June 2011: Speech by Margaret Cole at the FSA's conference on the FCA Margaret Cole followed on from Hector Sants' speech below at the FCA launch conference. She emphasises Hector Sants' message about the treatment of consumers following the widely reported mis-selling of certain financial products. She says the financial services industry "has the challenge of developing a culture of responsibility" and that the regulator needs to "[spot] problems earlier" and have tools in place for "robust early intervention." Margaret Cole refers to the difficult trade-offs and decisions which need to be taken and encourages wide participation in the consultation process. With the growing influence of EU legislation on UK policy-making, she states that the FCA "will need to engage effectively at an early stage in EU negotiation to influence the outcomes". "The main challenge ahead is for the FCA to devise new approaches which prevent consumer detriment in the first place, not just focusing on ensuring redress after the fact." To view the full speech, please click here.
28 June 2011: Speech by Hector Sants at the FSA's conference on the FCA This speech was delivered at the FSA's conference on the launch of the FCA. Many of the points raised are covered in more depth in the FCA Approach Document below. Other points to note include: Martin Wheatley (currently CEO at the Hong Kong Securities and Futures Commission) will join the FSA on 1 September 2011 and is the CEO designate of the FCA. Responsibility for the operating model of the FCA falls to Martin and Margaret Cole, currently head of the FSA's Conduct Business Unit. "[T]here is little or no evidence that any significant change has occurred in the attitude of the financial services industry towards its customers." This is presumably one of the main reasons for the FCA's more interventionist approach. The FCA will deliver a more proactive style of regulation which will come at an increased cost to the industry. The industry needs to join in the debate and consultation process to ensure these regulatory reforms go in the best direction. To view the full speech, please click here.
27 June 2011: FCA – approach to regulation This document sets out how the FCA will approach its new statutory and operational objectives, its new powers and further develops the Treasury's Blueprint for Reform. The FCA's strategic objective will be to protect and enhance confidence in the UK financial system, whilst also advancing one of its three operational objectives of protecting consumers, protecting and enhancing the integrity of the UK financial system and promoting competition. The FCA will be more interventionist than the FSA previously was. It will have a new product intervention power that will give it the "flexibility to intervene quickly and decisively where it considers that a product or product feature is likely to result in significant consumer detriment". The intention is that the FCA will deal with the root of the problem, rather than mitigating the effects when it becomes too late. Under its consumer protection remit, the FCA has defined "consumer" to include even the largest wholesale firms. This will give the FCA wide discretion over the interpretation of its objectives and enable it to ensure high standards across the financial services industry as part of its strategic objective. The FCA (and PRA) will be able to make public certain information relating to enforcement investigations at the warning notice stage, as opposed to when the Final Notice is published as presently is the case. The industry has argued that earlier publication could lead to significant reputational damage and undermine consumer confidence. To view the full paper, please click here.
23 June 2011: Speech by Lord Adair Turner, Chairman of the FSA, at the FSA's Annual Public Meeting In this speech at the FSA's Annual Public Meeting, Lord Turner talks about the challenges the FSA has faced in meeting its current statutory objectives whilst also preparing for the major organisational change ahead. He discusses each of the three new bodies: the FPC, PRA and FCA and their new approach. He also refers to the failures in regulation in the past, both in relation to firm supervision and conduct supervision, and how the new bodies will seek to take a more interventionist approach and step in at an early stage. He too refers to the important decisions relating to the trade-offs between how far the regulators can go before they stifle innovation, costs to the consumer and competition. To view the full speech, please click here.
20 June 2011: PRA – our approach to insurance supervision Following feedback to the 'Building a stronger system' consultation, the Government inserted a separate statutory objective for the PRA regarding the insurance industry in its Blueprint for Reform. This joint publication by the FSA and Bank of England sets out how the PRA will supervise insurance firms. The PRA's objectives will be to secure an appropriate degree of protection for policyholders and the need to minimise the impact an insurer's failure or the way it carries out business could have on the stability of the financial system. The paper recognises that the liabilities of insurers are fundamentally different to banks in that they are generally inherently uncertain. They also face different risks and therefore fail in different ways to banks. Accordingly the PRA's regulation of insurance firms will be framed differently to how it regulates banks. Much of the content of the paper on the way the PRA will supervise insurers is similar to the document on the supervision of banks (below). However the Bank and the FSA acknowledge that insurers are different to banks and that it has a different statutory objective to protect policyholders. Whilst supervision is likely to be very similar, it is hoped that the PRA does in fact recognise the distinction between insurers and banks and the importance both play in the global market. To view the full document, please click here.
16 June 2011: A new approach to financial regulation: the blueprint for reform This White Paper brings together the Government’s proposals from the previous consultations. The Blueprint fleshes out the Government’s proposals on: The establishment of the Financial Policy Committee (FPC), the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA). The implementation of many of the recommendations contained in the report from the Independent Commission on Banking (ICB). The Financial Services Bill (the Bill), the primary legislation which will bring the reforms into effect. For a more detailed summary, please click to see our briefing on the Blueprint. To read the full consultation paper, please click here.
15 June 2011: Mansion House speech the Rt Hon George Osborne MP The Chancellor reviews the UK's progress in seeking to come out of the recession before talking about the new regulatory structure. He speaks of the consensus on culture, international rules and where banks fit in. The failure of the existing system was "hard-wired into its design" and created a "world in which no one was in charge". By focusing on particular firms and costly box-ticking, the regulator missed the wider, systemic risks. The new reforms seeks to install a new culture, both for firms and the regulatory bodies, and seeks to prevent the failures of the past. The Chancellor's view is that we need to ensure global standards for our banks to protect London's status as "the world's leading financial centre". European coordination is needed to enforce common rules in the single market. The Government will fight ill-thought out European legislation in order to protect wholesale finance and London's position in the global marketplace. The Chancellor supports the proposals of the Independent Commission on Banking relating to: 'Bail-ins' instead of 'Bail-outs', which will see private investors and not the taxpayer bear the risk of a firm's failure; and ring fencing high street banks to make them safer. It should be noted that this was before the Independent Commission on Banking published its final report. To view the full speech, please click here.
15 June 2011: Mansion House speech by Sir Mervyn King, Governor of the Bank of England Sir Mervyn King discusses (amongst other things) the role of the FPC and PRA in the new regulatory environment. He notes that: The interim FPC will develop macro-prudential policy instruments which are aimed at preventing another financial crisis in the future. One of these policy instruments, and one of the FPC's roles, will be to issue recommendations and directions to the PRA and FCA. "Resolution will be at the heart of the new regulatory regime". The PRA will supervise individual firms and ensure their stability. It will not seek to prevent their failure. Legislation will make it clear that the PRA should seek to mitigate the effect of a firm's failure on the wider market. The PRA will seek to reduce the burden of routine data collection by focusing on major risks to the system. The complex reporting requirements of the existing system focussed too much on individual firms and missed the bigger picture. The new system will focus on system-wide developments before "strengthening the hand of the supervisor in dealing with a particular institution". To view the full speech, please click here.
19 May 2011: PRA – our approach to banking supervision This is a joint paper by the FSA and the Bank of England on the approach the PRA will take to supervising banks. The key theme which is repeated throughout is that the PRA will not seek to prevent a firm from failing. Its new statutory objective is to ensure an orderly wind-down in the event of failure. The level of supervision and intervention of the PRA will depend on the level of risk each firm poses to the system; although the PRA will always seek to look at the "bigger picture". If the PRA identifies vulnerabilities in a firm's business model or its financial position, the level of supervision will increase. Additional reporting requirements or a "section 166 report" may be imposed or the PRA could place restrictions on the firm's business activities until the vulnerability is resolved. In more serious cases, the PRA may order a change in management, higher liquidity requirements and/or a restriction on balance sheet growth. To view the full document, please click here.
17 February 2011: A new approach to financial regulation: building a stronger system In this follow-up consultation, the Government formally announces the change of name for the conduct regulator from the Consumer Protection and Markets Authority (which was always just a "working title") to the Financial Conduct Authority. The paper also contains a number of other changes and developments from the first consultation. Its aim was to develop the consultation further before issuing the draft legislation later in the year. The main themes are mostly the same, but the Government also announces some changes and further elaborates on each of the new bodies' functions and objectives. To view the full consultation paper, please click here.
24 November 2010: Summary of consultation responses to judgement, focus and stability The Government notes that the majority of respondents are supportive of their proposals on regulatory reform and the emphasis on stability and macro-prudential, as well as micro-prudential, regulation. The Government lists five recurring themes that it said it would consider and take into the next consultation: The accountability and transparency of the new bodies. The need to balance the core statutory objectives of each body. The importance of effective coordination between the new authorities. The need for a strong, coherent markets regulation function. The importance of the European and international agenda. To view the full summary, please click here.
26 July 2010: A new approach to financial regulation: judgement, focus and stability The Government's first formal consultation paper on the new reforms. This paper sets out its initial view of the roles each new body will perform and seeks to open up the consultation to a broad audience. There are a number of consultation questions on each body, their objectives, powers and approach. To view the full consultation paper, please click here.
17 June 2010: Speech by Mark Hoban MP on the launch of the consultation on a new approach to financial regulation Following on from the Chancellor's speech, Mark Hoban MP talks at the London Stock Exchange on the "new approach to financial regulation". Here he launched the Government's first consultation paper: "A new approach to financial regulation: Judgement, Focus and Stability". He also discusses the flaws in the existing system and briefly announces the roles of the new bodies. To view the full speech, please click here.
16 June 2010: Mansion House speech by the Rt Hon George Osborne MP Even though the Conservatives, and then the Coalition Government, had pledged to reform the existing regulatory system, this was the first official announcement by the Chancellor of the Government's plans to abolish the current system in place of the 'twin peaks' system. To read the full speech, please click here.