UK: Division to spawn specialist regulation

By added on 24/06/2011

The Treasury has vowed to create a financial system where regulators must exercise judgement to ensure sector stability, as it unveils a White Paper and draft bill on reform, the FT Advisor reports.

A 50-page document, A New Approach to Financial Regulation, accompanying its draft Bill on financial reform, claimed the establishment of a Financial Policy Committee, Prudential Regulation Authority and Financial Conduct Authority, would create regulators with relevant expertise.

It said the government was focused on “creating a system of regulation in which regulators, within their spheres of expertise and focus, are not only able, but are required, to exercise the judgements needed to ensure that the financial sector is stable and efficient, and fulfils its role in supporting the economy”.

The document confirmed the dismantling of the FSA and creation of the FPC, PRA and FCA under the Bank of England. It also spoke of extending powers to the PRA and bringing in stricter enforcement rules.

The document also states that insurers will fall under the spotlight of the PRA.

The FCA will concentrate on protecting consumers and promoting confidence in financial services and markets. Conduct of financial services professionals, including IFAs, will fall under its remit.

It will have the power to intervene to impose requirements on products and financial advertisements, as well as ban them. It can disclose the commencement of formal enforcement action against a firm.

Both the PRA and FCA will be required to produce reports where there has been a regulatory failure.

A further change proposed in the document is shortening the time for subjects of enforcement actions to respond from 28 to 14 days.

Otto Thoresen, director general of the Association of British Insurers, welcomed PRA oversight, but said: “There will need to be clear detail about how the PRA and FCA should work together to make sure there is no overlap, gaps or confusion if we are all to make this work.”

A spokesman for the British Bankers’ Association said it would monitor the changes to ensure the establishment of the “right regulatory institutions with the right powers”.