Financial Regulation

Question 1

What three main areas does risk management regulation for financial institutions cover?

Answer 1

1. Financial solvency of financial institutions (Prudential regulation)
2. Financial market stability (Prudential regulation)
3. Conduct of financial institutions, their employees and intermediaries (Business Regulation)

Question 2

Name two prudential regulations and one business one

Answer 2

Prudential: Financial solvency of financial institutions; financial market stability

Business: conduct of financial institutions, their employees and intermediaries

Question 3

Name international agencies (financial services risk management)

Answer 3

• Bank for International Settlements (BIS)
• Financial Stability Board (FSB)
• European Banking Authority (EBA)
• ECB

Question 4

Name British organisations regulating financial services

Answer 4

• Prudential Regulatory Authority
• Financial Conduct Authority
• Financial Ombudsman

Question 5

Name others organisations in British Isles

Answer 5

• Guernsey Financial Services Commission
• Jersey Financial Services Commission
• Isle of Man Financial Services Authority

Question 6

Can organisations authorised to operate in crown dependencies provide financial services to UK or EU residents?

Answer 6

No - this prevents organisations from exploiting regulatory loopholes

Question 7

Outline the role of the PRA

Answer 7

• Created Financial Services Act 2012
• Regulates banks, building societies, insurers, credit unions and larger investment firms
• PRA is part of BoE

1. Promotes financial safety and soundness of firms it regulates
2. For insurers, securing an appropriate degree of protection for existing and potential future policyholders
3. Facilitating effective competition

• Drafts policy and supervises orgs
• PRA Rulebook (capital buffers, role of auditors and audit committees, risk roles and responsibilities, management of certain risks, risk control in general, risk reporting)
• Influenced by EU directives

Question 8

Outline role of the FCA

Answer 8

• Established in 2013
• Regulates 56,000 financial and non-financial organisations
• Ensures financial markets operate honestly and fairly - fair deal
• Involved in prudential regulation of smaller financial organisations

Objectives:
1. consumer protection
2. protecting integrity of financial markets from misconduct
3. promoting competition in financial markets

• INcorporate UK Listing Authority
• Regulatory policy (roles and resp for RM, management of financial crime, management of conduct-related risk, compliance management, purchase of prof indemnity insurances, whistleblowing, disloing risks)

Question 9

Outline the role of the Financial Ombudsman

Answer 9

• Resolve disputes between financial organisations and customers
• Does not regulate risk but issues judgements that can affect risk activity