On 6 February 2012, Hector Sants, CEO of the UK Financial Services Authority (FSA) explained in a speech to the British Bankers’ Association that on 2 April 2012 the FSA will be split into the Prudential Group (shadowing the future Prudential Regulation Authority) and the Conduct Group (shadowing the future Financial Conduct Authority). This is in advance of the formal split due to take place in early 2013, once the Financial Services Bill comes into force (see our earlier blog post on the topic here).

The aim of the Prudential Group will be to ensure the safety and soundness of firms and to avoid disorderly failure which has systemic consequences. For insurers, there is a further aim of ensuring protection of policyholders through sound financial management. The Conduct Group’s aim will be to ensure that markets work well by protecting and enhancing their integrity and protecting consumers.

There are however obvious concerns at the potential duplication of the roles of the Prudential Group and the Conduct Group and the practicalities surrounding their interaction. In particular, the need for authorisation from both groups could make the process for financial services firms both more repetitive and burdensome.

Mr Sants’ speech focussed on the proactive regulation that the new structure will enshrine and the changes this will entail. For insurers, Mr Sants did recognise that “as a result of [the] earlier  [Tiner] insurance capital reforms the situation in respect of insurance supervision was somewhat better”, putting the focus on the banks.

Click here to read the full text of Mr Sants’ speech.