A new approach to financial regulation: judgement, focus and stability
This document outlines the Government's programme of reform to renew the UK's system of financial regulation. It believes that weaknesses were inherent in the tripartite approach whereby three authorities - the Bank of England, the Financial Services Authority and the Treasury - were collectively responsible for financial stability. The Government will create a new Financial Policy Committee (FPC) in the Bank of England with primary statutory duty to maintain financial stability. The FPC will be given control of macro-prudential tools to ensure that systemic risks to financial stability are dealt with. This macro-prudential regulation must be co-ordinated with the prudential regulation of individual firms. Operational responsibility for prudential regulation will transfer from the FSA to a new subsidiary of the Bank of England, the Prudential Regulation Authority. The third development is the creation of a dedicated Consumer Protection and Markets Authority (CPMA) with a primary statutory responsibility to promote confidence in financial services and markets. Protection of consumers will be delivered though a strong consumer division within CPMA. The document also covers: the issue of market regulation; co-ordination of the regulatory bodies in a potential crisis; the next steps, including public consultation, legislative passage and operational implementation. The Government will, after considering responses, produce more detailed proposals - including draft legislation - for further consultation in early 2011, with a view to having legislation on the statute book within two years.
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The Bank of England and Financial Policy Committee
Prudential Regulation Authority
Consumer Protection and Markets Authority
Markets and infrastructure
Annex A Consultation questions and how to respond
Annex B Preliminary impact assessment
accountability action appropriate authorisation Bank of England Bank's central banks CFEB Chancellor chief executive conduct of business consider Consultation questions consumer credit consumer protection coordination CPMA's crisis management currently decisions Deputy Governor detail effective ensure example financial crisis financial markets Financial Ombudsman Service Financial Policy Committee financial regulation financial sector Financial Services Authority financial system FPC's framework FSCS FSMA Government believes Government recognises Government welcomes views Government will legislate HM Treasury Horse Guards Road identify impact assessment Impact Test quidance implementation individual firms infrastructure investment banks Lloyd's of London macro-prudential policy macro-prudential regulation macro-prudential tools markets authority CPMA monetary policy monitoring ongoing costs Parliament Policy Committee FPC potential PRA's primary objective proceed option protection and markets Prudential Regulation Authority regime regulated activities remit responsible role rule-making rules services and markets significant supervisory systemic risks transparency Treasury tripartite system UK financial UK's wider