Chapter 3 - Sector regulators Flashcards
When does the EU get involved in the regulation of risk-management activities?
The EU only gets involved in the regulation of risk-management activities in sectors where risk cross member state boundaries or where the human rights of EU citizens are threatened and the protection provided by its human treaties and the ECJ is considered to be insufficient.
EU regulations on risk-management exist in which three areas?
- the stability of the financial services sector
- environmental protection – nuclear power stations and other environmentally hazardous activities
- health and safety – safety of medicines, food safety and the health and safety of employees and consumers
What is the role of the European Central Bank?
Central bank for all EU member states that have adopted the Euro – responsibility for maintaining financial stability for all systematically important financial institutions (banks, insurance companies, etc)
What are the three statutory objectives derived from the Financial Services Act 2012 for the PRA?
- To promote the financial safety and soundness of the firms it regulates
- For insurers, securing an appropriate degree of protection for existing and potential future policyholders
- Facilitating effective competition
Who does the PRA regulate?
1500 banks, building societies, insurers and larger investment firms
As part of risk management, how can the PRA supervise?
- Demanding detailed financial and risk-management reports
- The review of risk-management policies and other documents
- Visits to talk with board members, senior managers, risk management and audit professionals
- Enforcement action, including fines, where necessary
Who does the FCA regulate?
regulates financial conduct of around 56,000 organisations to ensure that financial markets operate honestly and fairly so that all stakeholders, especially consumers, get a fair deal
What are the three main objectives of the FCA?
- Consumer protection;
- Protecting the integrity of financial markets from misconduct (such as insider trading)
- Promoting competition in financial markets to ensure that consumers get a fair deal
In relation to risk, what regulatory and supervisory activties can the FCA issue?
- Roles and responsibilities for risk-management, especially in relation to the management of conduct-related risks e.g. mis-selling, insider trading, market manipulation, unfair contract terms, etc
- The management of financial crime risks, including money laundering and terrorist financing
- Compliance management
- Whistleblowing
What is the Financial Ombudsman role in relation to risk?
helps resolve disputes between financial organisations and customers – does not regulate risk-management activities but does **issue judgements that can affect organisation’s risk-management activities **
What risk-management activities does the health and safety regulation cover?
- The identification and assessment of health-and-safety hazards, including determining who might be affected (employees, customers, etc) and how they might be affected (injury or ill-health)
- Taking appropriate measures to control health-and-safety hazards to protect stakeholders from harm
- Recording health-and-safety incidents and reporting major incidents to the relevant regulatory agency
- Implementing appropriate policies and procedures for all of the above
The UK Health and Safety Executive (HSE) has three powers from the Health and Safety at Work Act 1974. What are they?
- create regulations
- inspect health-and-safety practices in organisations
- take enforcement action, e.g. issue fines
The HSE is responsible for three further pieces of UK legislation - what are they?
- Control of Substances Hazardous to Health (COSHH) Regulations 2002 - apply to substances that are deemed to be especially hazardous, such as acids, fumes, dusts and vapours. Many organisations are affected by the COSHH regulations, e.g. dry cleaners or hairdressers
- Reporting of Injuries, Diseases and Dangerous Occurrences Regulations (RIDDOR) 2013 - Apply to all organisations in the UK. Organisations are required to report to the HSE any significant injuries, diseases or dangerous occurrences
- **Employers Liability (Compulsory Insurance) Act 1969 **– helps employer pay compensation if an employee is injured or becomes ill relating to work
Why does environmental regulation exist? There are two main reasons.
- **Asymmetric information **– stakeholders often do not have full information on the effects that organisational activities have on the environment (e.g. pollution)
- Issue of public goods – pollution prevention is a public good because organisations and their stakeholders do not receive the full benefits of this prevention but incur all of the costs. Therefore, they may be insufficient pollution prevention without regulation
Because of the public-good nature of many environmental problems, international agreements and treaties exist to mitigate the effects. One example of this is the Kyoto Protocol: international treaty to limit global warming by controlling human-made carbon dioxide emissions
What does the Environment Agency cover?
- Management of UK waterways
- Chemicals
- Meeting EU and international climate change agreement obligations
- Promoting energy efficiency
- Environmental permits
- Flooding
- Nuclear safety
- Oil storage and spills
- Protecting environmentally sensitive sites
- General wildlife and habitat conservation
The EA has the power to take enforcement action against organisations and individuals where necessary. This can include prohibition orders to stop polluting activities and criminal prosecution resulting in fines and imprisonment for serious environmental offences.
