Unit 5 - Financial Regulation Flashcards
What is Regulation & Supervision?
They are closely interlinked & one is not effective without the other.
1. Regulation- Rules & guidelines that define acceptable behaviour & conduct, must comply with laws.
2. Supervision- Process which regulatory authorities oversee & enforce compliance with these rules & guidelines.
What is Macroprudential Regulation?
Regulation concerned with the stability of the financial system as a whole eg of macroprudential measure is improving affordability rules on mortgages for all lenders so that banks face fewer bad debts
What is microprudential regulation & example?
Concerned with stability of individual banks & other financial institutions eg measures to ensure banks can handle external risks and to improve their liquidity
What is conduct regulation?
Aims “to ensure that financial markets work well for individuals, for businesses and for the economy as a whole”
Who is responsible for macroprudential regulation & what’s their job?
Financial Policy Commitee & is to “identify, monitor & take action to remove/reduce systemic risks to the UK’s financial system” ( Bank of England 2023)
Who is responsible for Microprudential regulation & their job?
Prudential regulation authority & focuses on consumer protection as well as promote safety and soundness of the firms it regulates
Who is responsible for the conduct of business regulation & its job?
Financial conduct authority & it is funded by fees paid by the firms/banks it regulates, also it’s how firms conduct their business ie to ensure UK financial markets are fair, competitive
What would be an example of sensitive data?
- Race
2.Sex - Religion
- Political issues
- Health & details of criminal record
What is monetary stability?
Means that the country’s currency maintains its value over time
What’s the case study for Monetary Stability ( The Bank Of England)?
The UK’s central bank is The Bank of England and it’s responsible for achieving monetary stability in the UK by supporting low inflation, employment & economic growth.
Who controls inflation & how in the UK?
The Bank of England controls inflation through monetary policy & it’s Monetary Policy Committee increases/reduces interest rates to control spending
What are additional functions for Central banks?
Issuing bank notes, payment & settlement, and holding reserves
What’s the responsibility of the Bank of England of financial regulatory framework?
The Bank of England has macroprudential responsibility for the oversight of the financial system & it also has day to day microprudential supervision of larger financial services firms
What are the 3 bodies of the UK financial regulatory framework?
- 2 of the regulatory bodies are part of the Bank of England- the Financial Policy Committee for macroprudential policy & the Prudential Regulation Authority for microprudential policy.
- The 3rd regulator, Financial Conduct Authority is an independent public body.
With the 3 bodies of the UK financial regulatory framework, what does it form?
These 3 bodies: the FCP, PRA & FCA work closely together & with the UK governments finance ministry known as HM Treasury
What’s the objectives of FCA?
- Protect customers from bad conduct including bad advice,fraud
- Protect the integrity of the UK financial system
- Promote effective competition in the interests of consumers, its good to make firms do their best to win customers
How much can banks give if they failed with deposits to customers?
£85,000
Who pays depositors if their banks become insolvent?
Financial Services Compensation Schemes
What does Financial Services Compensation Schemes provides compensation losses for?
- Deposits made with failed banks up to £85k per person
- Pension with a failed pension provider
- Bad mortgage advice/ mis-selling of a mortgage endowment
- Cover with a failed insurer
- Payment protection insurance policies where the info given was insufficient/misleading
What authority promote competition and how?
The Competition and Markets Authority & they share objectives with UKs conduct regulator FCA
What is role of PSR?
Payment Systems Regulations- ensure systems work efficiently
In the Uk, the role is:
1. Ensure appropriate payment systems
2. Promote effective competition
3. Promote innovation
What countries does PSR differ in?
Many countries the payment system’s regulation is done by central bank such as India where the Reserve Bank is responsible for overseeing payment systems. In UK, a special body: The payment systems regulator(PSR)
How does the Pensions Regulator work in UK? ( Protects UK’s workplace pensions, making sure that employees, trustees, pension specialists & business advisers can fulfill their duties to scheme members; Pensions Regulator 2023)
It’s a non-departmental public body that regulates work-based pension schemes. Works with FCA to address risks/harms in pensions.
What are serious fraud prevention bodies in Australia and UK?
- The Serious Financial Crime Taskforce(SFCT) targets serious crimes in Australia, its priorities in 2023 included tech enabled tax crime(cybercrime) & offshore tax evasion.
- Serious Fraud Office(SFO) is a specialist prosecuting authority that tackles serious fraud, it oversees large crime cases and assists overseas jurisdictions
