Topic 6 Flashcards
What are the 3 core objectives of regulation?
- To sustain sytematic stability
- To protect the consumer ‘asymmetric information’
- To maintain the safety and soundness of financial institutions
What are the 2 types of regulation?
Prudential regulation – for example, the requirement to hold sufficient funds in an appropriate form (separate from any funds supplied by depositors)
to cover any losses due to borrowers defaulting on the repayment of loans.
Conduct of business regulation – relating to business practices when dealing with customers, and including rules about honesty and integrity,
disclosure of relevant information, competence of management and staff, and marketing practices.
What is the Financial Services and Markets act 2000? (FSMA)
The FSMA 2000 provided the legislative framework through which the FSA became the single regulator of the UK financial services sector, with powers to regulate the professional and business behaviour of all parts of the industry, from the largest institutions to individual employees and sole traders.
What is the Financial Services Authority? (FSA)
The Financial Services Authority (FSA) was the agency that was responsible for regulating the UK banking sector on behalf of the Bank of England from June 1998
What is the Financial Services Act (2012)?
The FSA was set up within a broader overall framework, known as the tripartite system of regulation, comprising the Bank of England, the FSA and the Treasury (collectively known as ‘the Authorities’).
The tripartite system was heavily criticised during the financial crisis for failing to act swiftly and decisively, particularly after the failure of Northern Rock.
They amended the FSMA and created a new regulatory framework, giving the Bank of England overall responsibility for oversight of the financial system.
What is the Bank of England and Financial Services Act 2016?
The act comprises 2 parts:
- Amendments to the Bank of England structure. In particular, the PRA moved from a subsidiary of the Bank to part of the Bank, under the control of the newly created Prudential Regulation Committee (PRC), which had equal status with the Monetary Policy Committee (MPC) and the Financial Policy Committee (FPC).
- Regulatory changes, including the extension of the Senior Managers and Certification Regime from banks and major insurers to all sectors of the
financial services sector.
What was the aim of The European Union (withdrawal) act 2018?
the aim as amended by the European Union (Withdrawal Agreement) Act 2020 was to retain EU law (implemented through directives and regulations) in the UK as it was before the UK left the EU. The Act included powers for the government
to correct ‘deficiencies’ in the EU law that would cause problems after the UK left the EU. Any major changes to implemented EU law require the full
parliamentary processes.
What does the Prudential Regulation Committee (PRC) do?
The Prudential Regulation Committee makes the Prudential Regulation Authority’s most important decisions
What does the Monetary Policy Committee (MPC) do?
Decide the interest rate through meetings
What role does the Financial Policy Committee play in the UK financial system?
The FPC has a key role in maintaining stability of the UK financial system through what is known as ‘macroprudential supervision’. Macroprudential could be interpreted as looking at the ‘big picture’ of the UK’s financial system and identifying actual and potential risks to the system as a whole.
The FPC has two main powers where the potential risks are unacceptable – the power to make recommendations to the PRA or FCA, and the power to direct the regulators to take action by adjusting certain macroprudential tools.
Which bodys role is to ‘ensure that consumers get a good deal when buying goods and services, and businesses operate within law?
The Competition and Markets Authority (CMA).
What is the Payments system regulator (PSR) responsible for?
ensuring uks payment systems are efficient, reliable, competitive and innovative (also and independent subsidiary of the FCA)
The information commissioner has responsibilities under which 2 acts of parliament?
The Data Protection Act and the Freedom of Information Act.
Under the FSMA 2000 what happened of the dates December 2001, October 2004, January 2005?
a) December 2001 – Financial Services and Markets Act 2000 (FSMA) gave
effect to a new regulatory regime, with the Financial Services Authority
(FSA) assuming regulatory responsibility for almost all of the financial
services industry.
b) October 2004 – mortgages became regulated by the FSA.
c) January 2005 – general insurance became regulated by the FSA.
Describe the role of external oversight groups
ensure activities of financial services institutions are constantly under review to ensure investments of both shareholders and customers are being handled safely and honestly
