module five Flashcards
Systemic regulation
safety and soundness of financial system covering all public policy regulations designed to minimise risks. Bank runs happen when a large number of people make panic withdrawals as they fear they will run out of money.
Prudential regulation
consumer protection relating to the monitoring and supervision of financial institutions with attention paid to asset quality and capital adequacy which is a measure of a bank’s ability to pay its debts.
Conduct of business regulation
focuses on how banks conduct their business. Purpose is to protect customers from harm, preserve and enhance integrity.
Central bank
a financial institution responsible for overseeing monetary system with the key functions of: Control issue of notes and coins, Control amount of credit money created by banks, Have control over non-bank financial intermediaries, Use monetary policy to control credit expansion, Oversee financial sector to prevent crises, Act as lender of last resort to protect depositors, Act as governments banker, Act as official agent to the government
UK financial regulation framework
1st April 2012 - financial services act - contained the UK governments reforms of the UK financial services regulatory structure and created a new regulatory framework. Gives bank of England macro-prudential responsibility for oversight of financial system.
Prudential regulation authority
Requires financial firms to hold sufficient capital and have risk controls in place with the three objectives of: Promoting safety of firms it regulates, Contributing to securing appropriate degree of protection, Facilitate effective competition between firms
Financial conduct authority
Responsible for authorising, supervising and taking action against those undertaking financial services activities. Its objective is to ensure the relevant markets function well and it protects customers and financial markets and also promotes competition.
Financial ombudsman service
settles complaints with financial services firms
Financial services compensation scheme
handles claims for compensation from consumers when firms cant
Payment systems regulator
independent economic regulator for payment systems
Pensions regulator
protects pensions making sure employers, trustees, specialists and advisors fulfil their duties
Serious fraud office
investigates and prosecutes fraud, bribery and corruption
National crime agency
law enforcement agency with responsibility for intelligence and operational response to serious organised crime
Money advice service
provides free financial information and education
Department for business, energy and industrial strategy
aims to build an economy for people to work and businesses to invest, innovate and grow.
UK competition network
alliance of regulators promoting competition in interest of consumers
UK regulators network
initiative to enhance collaboration on issues of shared relevance to bring regulators together
Financial ombudsman service responsibilities
investigate fairly listening to both sides, give an answer quickly (within 90 days), explain things clearly
Financial services compensation scheme
Offers compensation to depositors and holders of insurance policies. Provides services for: Consumer - provides protection when firms fail, reassuring people and enabling them to buy regulated financial products confidently, Customers - helps people by offering a claims services that’s fast and easy to use, Industry - operates as efficiently as possible contributing to prevention of future failure recovering as much as possible from failed firms to offset costs of compensation, Regulators - ready to respond to major firm failures and crises working with regulatory family supporting orderly resolution of failing firms.
Financial safety net
a comprehensive system enhancing and ensuring a countries financial stability consisting of: Regulation and supervision (ensures countries financial stability due to impact bank failure can have), Lender of last resort (central bank will provide funds to banks in financial difficulty), Deposit insurance schemes ( a guarantee for the amount deposited by savers will be paid if a bank fails), Bank insolvency/resolution laws (legal provisions that regulate conditions for handling of bank failures), Cooperation and resolution processes (safety net in case of crisis depending on efficient communication and cooperation)
Structural reform
Government developed legislation requiring banks to separate provision of core retail services from other activities like investment and international banking
Structural reform aim
protect UK retail banking from shocks in global financial markets designed to increase the stability of the financial system and prevent costs of failing banks
structural reform requirements
protect UK retail banking from shocks in global financial markets designed to increase the stability of the financial system and prevent costs of failing banks
Effects of structural reform
most banking groups adopted new legal structures some having impacts on the customers (like sort code and account number changing)
Bank capital regulation
Capital requirements directive IV - legislative package covering prudential rules for banks, building societies and investment firms
Basel III
set of financial reforms developed to strengthen the regulation supervision and risk management.
Efficiency and economy (principles of good regulation)
the treasury can commission value-for-money reviews of our operations
Proportionality (principles of good regulation)
ensure any burden or restriction is proportionate to benefits expected as a result meaning we take into account the costs to firms and consumers.
Sustainable growth (principles of good regulation)
ensure there’s a desire for sustainable growth in the economy
Consumer responsibility (principles of good regulation)
customers should take responsibility for decisions
Senior management responsibility (principles of good regulation)
responsible for firms activities ensuring business complies for regulatory requirements
Recognising differences in businesses carried by different regulated people (principles of good regulation)
recognise differences in businesses carried by different people subject to requirements
Openness and disclosure (principles of good regulation)
publish relevant market information reinforce market discipline and improve customers knowledge about financial matters
(principles of good regulation)
Transparency (principles of good regulation)
provide appropriate information being open and accessible to the public
Fair treatment of customers
Outcome 1 - consumers confident dealing with firms with fair treatments of customers
Outcome 2- products and services marketed and sold are designed to meet needs of consumer groups and targeted accordingly
Outcome 3 - customers are provided with clear information and kept informed through all points of sale
Outcome 4 - when consumers receive advice its suitable and takes account of their circumstances
Outcome 5 - consumers provided with products performing as expected and the service is of acceptable standard
Outcome 6 - consumers don’t face unreasonable post-sale barriers
Senior managers regime
must be assessed as fit and proper, have clear responsibilities and be subject to conduct requirements including duty to take steps in fulfilling the responsibilities
Certification regime
risk taking employees need to determine an appointment and certify annually that they’re fit and proper to undertake rolls
Regulatory references
as part of hiring-process for senior decision makers and key risk taking employees firms must exchange mandatory employment references containing information on prior conduct
Conduct rules
all financial services staff subject to minimum conduct standards
Assessing creditworthiness
some don’t consider it a long term cost making consumers susceptible to being old unsuitable products and services with the concerns more for high-cost credit users.
Improving business model
many firms have improved their business models now firms are more aware of the expectations.
FCA’s regulatory roles
intervenes when sees harm, promotes competition, authorises and supervises against rules, priorities harm affecting vulnerable customers, takes actions when firms haven’t met the rules.
FCA findings
common themes of complex product design and pricing, persistent debt, lack of clear information, how products operate and have they are bought and sold.
FCA’s market study
vulnerable are most likely to be affected if credit information isn’t working well. Focuses on the purpose, quality and accessibility of credit information, market structure, business modules and competition, consumers understanding of credit information.
Who the GDPR applies to
Controller - a person determining purpose and means of processing personal data, Processor - person responsible for processing personal data on behalf of controller
consent
individuals given clear consent for the organisation to process their personal data for a specific purpose
Contract
processing is necessary for a contract the organisation has
Legal obligation
processing is necessary for the organisation to comply with the law
Vital interests
processing is necessary to protect someone’s life
Public task
processing is necessary for the organisation to perform a task in public interest and it has a clear basis in law
Legitimate interests
processing is necessary for legitimate interests of organisation or 3rd party
The right to be informed
must let individuals know the reasons for processing their data
The right of access
have access to the information held about them on request
The right of rectification
have inaccurate personal data rectified
The right of erasure
have personal data deleted in certain circumstance
The right to restrict processing
to request their data to be restricted
The right to data portability
allows individuals to obtain and reuse their personal data
