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R01 2023 > 4 - The Regulation of Financial Services > Flashcards

4 - The Regulation of Financial Services Flashcards

1
Q

FPC: Definition

A

Independent Financial Policy Committee (2013) within BOE. FPC charged with objective of identifying, monitoring and taking action to remove or reduce systemic risk to provide a more resilient financial system in the UK.

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2
Q

PRA: Definition

A

Sits within BOE and responsible for the stability and resolvability of systematically important financial institutions such as banks. Promote “safety and soundness” of firms

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3
Q

FCA: Definition

A

Separate independent regulator responsible for conduct of business and market issues for all firms and prudential regulation of smaller firms

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4
Q

What did Bank of England and Financial Services Act 2016 do?

A

Bank of England at heart of UK financial stability by strengthening bank Governance and operate as “one bank”.

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5
Q

When did PRA become part of BOE

A

2017 - PRC

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6
Q

UK financial authorities (3)

A
  1. HM Treasury
  2. BOE (FPC and PRA)
  3. FCA
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7
Q

HM Treasure responsibilities

A

HM treasury is responsible for formulating and putting into effect the UK government financial and economic policy

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8
Q

Who does HM Treasury have representation on and not?

A

Does: FPC
Does not: FCA or BOE

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9
Q

BOE, what is it committed to do

A

BOE committed to promoting and maintaining a stable and efficient monetary and financial framework.

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9
Q

What are two core purposes of BOE

A
  1. Monetary Stability - MPC to meet inflation
  2. Financial stability - lender of last resort
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10
Q

FPC: Members consist of

A
  1. HM Treasury
  2. BOE
  3. PRA
  4. Fca
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10
Q

Who is responsible for banks bi-annual financial stability report

A

FPC

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11
Q

How many firms do PRA regulate

A

1500

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12
Q

PRC members consist of

A
    • Governor of Bank of England
    • Deputy Governor for Prudential Regulation
    • Deputy Governor for financial stability
    • Deputy Governor for markets and banking
    • One member appointed by Governor of bank with approval of Chancellor of the Exchequer
    • The Chief Executive of the Financial Conduct Authority
    • At least 6 external members appointed by chancellor of exchequer.
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13
Q

Who is responsible for FOS

A

FCA

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14
Q

Who is responsible for FSCS

A

FCA

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15
Q

FCA Operational objectives

A
  1. Consumer protection
  2. Integrity of UK financial system
  3. Competition
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16
Q

Who is lead regulator for outward passports for dual-regulated firms

A

PRA

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17
Q

What are the legislative acts of EU (5)

A
  1. Treaties
  2. Legislation
  3. Regulations
  4. Directives
  5. Decisions
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18
Q

Who are the treaties created by

A

Direct negotiation between the governments of the Member States, after which they must be approved by their national parliaments/referendum.

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19
Q

When do regulations take place in EU legislative Acts

A

Takes effect immediately and do not need to be approved by national parliament

20
Q

How are directives authorised in EU Legislative act?

A

Desired results binding on Member States but methods to achieve them left to the national authorities to incorporate into the domestic legal system.

21
Q

What are the EU Directives affecting financial services in UK

A
  • Capital Requirements Regulation (CRR)
  • European Market Infrastructure Regulation (EMIR)
  • General Data Protection Regulation (GDPR)
  • Markets in Financial Instrument Regulations (MIFIR)
  • Packaged Retail and Insurance-based Investment Products Regulation (PRIIPS)
  • Sustainable Finance Disclosure Regulations (SFDR)
22
Q

Who do European Supervisory (ESAs) work with and what do they aim to do

A

European Systemic risk board ensuring financial stability and strengthen and enhave EU supervisory framework

23
Q

What are the ESAs

(3)

A
  • European Securities and Market Authorities (ESMA)
  • European Banking Authority (EBA)
  • European Insurance and Occupational Pensions Authority (EIOPA)
24
Q

What are the roles of ESAs

A

Create a single rulebook across Eu countries
investigate national supervisors
Temporarily ban certain financial activities
Provide EU-wide coordination and mediation

25
Q

MIFID I - what is it

A

It was a legislation that regulates firms which provides services clients linked to “financial instruments” (bonds, unit trusts…) and venues where instruments are traded. MiFID enhanced the regulatory framework to reflect developments in financial services and markets. The aim was to set out basic high-level provisions governing organisational and conduct of business requirements that should apply to firms

26
Q

What could EU countries not do when setting rules?

A

EU countries may not introduce rules that are stricter than those set in Directive. Increased emphasis on senior management responsibility and has played a part in EU’s financial services Action Plan designed to help integrate Europe’s Financial Markets

27
Q

What are Article 3 MiFD exempt firms ((see FCA Handbook PERG 13.5))

A

Some IFA firms which only advise on and arrange investments for UK based customers do not hold or control client monies.

28
Q

MIFID II What changed compared to MIFID

Retail

A
    • disclosure of costs and charges;
    • reporting of significant losses (greater than 10%) since the client’s last valuation (for discretionary portfolios);
    • product governance;
    • describing advice services;
    • structured deposits;
    • suitability;
    • recording conversations; and
    • inducements.
29
Q

Who implemented Insurance Mediation Directive (IMD (2005))

A

HM Treasury - bring non-investment insurance into scope of financial regulation

30
Q

What is IMD

A

Set common minimum standards across EU countries for regulation of sale and administration of insurance.
The IDD’s aim was to make it easier for firms to trade across borders, strengthen policyholder protection and provide a level playing field

31
Q

Ancilliary insurance intermediaries

A

. This includes connected travel insurance providers that don’t sell or introduce insurance as their main business, but still do so and therefore are subject to selling rules.

32
Q

What is a requirement for all general insurance firms to provide customers with

A

Insurance Product Information Documents (IPIDs).

33
Q

Professional indemnity insurance (PII)

claim

A

€1,300,380 for a single claim
the higher of €1,924,560 or an amount equivalent to 10% of annual income (subject to a maximum of £30 million) in aggregate.

34
Q

What is Basel I

A

Helped strengthen soundness and stability of international banking system because of higher capital ratios that it required.

35
Q

What is Basel II and how was it implemented

A

A revision of existing framework, aiming to make framework more risk sensitive and representative of modern banks’ risk management practices.

Implemented via the Capital Requirements Directive (CRD) and Capital Requirements Regulation (CRR).

36
Q

Three Pillars in Basel II

A
  1. Pillar 1 of the new standards sets out the minimum capital requirements firms will be required to meet for credit, market, and operational risk.
  2. Under Pillar 2, firms and supervisors must take a view on whether a firm should hold additional capital against risks not covered in Pillar 1 and act accordingly.
  3. The aim of Pillar 3 is to improve market discipline by requiring firms to publish certain details of their risks, capital, and risk management.
37
Q

CRD IV

A

implement the Basic III accord which helped minimise the negative effects of firms failing by ensuring they held enough financial resources to cover risk associated with their business.

38
Q

Money Laundering Directives

A
  • Fourth Money Laundering Directive (4MLD)
  • The Money Laundering Regulations 2017 (MLR)Money Laundering Regulations 2017 (MLR)
  • The Money Laundering and Terrorist Financing Regulations 2019, implementing the Fifth Money Laundering Directive (5MLD)
39
Q

5MLD when did it come into UK

A

10 January 2020

40
Q

The Joint Money Laundering Steering Group: What do they do

A

Produces guidance to assist those in the financial industry comply with their obligations in terms of UK anti-money laundering and counter terrorist financing legislation.

41
Q

Who fights money laundering and terrorist financing? (international organisation)

A

The Financial Action Task Force

42
Q

Mortgage Credit Directive (MCD) - what is it

A

An EU framework of conduct rules for mortgage firms

43
Q

Packaged Retail and Insurance-based Investment Products Regulation (PRIIPs) - aim

A

aim to encourage efficient EU markets by helping investors to better understand and compare the key features, risk, rewards, and costs of different PRIIPs, through access to a short and consumer-friendly Key Information Document (KID).

44
Q

Competition and Markets Authority; what do they regulate

A

Competition and Consumer protection

45
Q

CMA: Who do they work with

A

CMA works with HM Treasury and FCA as an independent public body to ensure competition between companies in the UK remains fair for the benefit of business, consumers and the economy as a whole.

46
Q

The Pensions Regulator

Definition

A

The pensions regulator is the UK regulator of work-based pension schemes.

47
Q

TPR how much can they fine people in breach of law

A

Individual: £5000
Company up to £50,000

48
Q

TPR: Climate, what is value of assets the firm must have before they investigate for climate

A

£1bn

49
Q

Information Commissioner Office

What do they do

A

ICO is the UK’s independent public body set up to maintain information rights in the public interest, promoting openness by public bodies and data privacy for individuals.

50
Q

Who is responsible for ensuring compliance in a firm for FCA

A

Generally compliance consultant

R01 2023 (11 decks)

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