In the wake of the worldwide financial crisis and election of the UK’s coalition govrnment, HM Treasury proposed a wholesale overhaul of the financial regulatory system in the UK in a consultation document issued in July 2010 entitled “A new approach to financial regulation: judgement, focus and stability“. The proposals involved disbanding the Financial Services Authority and establishing the following three specialist regulators:
• a macro prudential regulator, the Financial Policy Committee, within the Bank of England with no direct regulatory responsibility for any firms;
• a micro prudential regulator, the Prudential Regulation Authority, a subsidiary of, but operationally independent from, the Bank of England; and
• a conduct of business regulator, the Consumer Protection and Markets Authority (the CPMA) ensuring consumer protection and confidence in retail and wholesale financial markets.
The summary of responses to the consultation document, published in November 2010, notes that most respondents welcomed the proposed new framework for financial regulation. However, respondents identified the following key themes for further consideration:
1. the importance of accountability and transparency for each of the regulators;
2. that each regulator’s core statutory objective should be balanced and supplemented by other factors;
3. the importance of effective co-ordination between each of the regulators;
4. that there should be a strong and coherent wholesale markets regulation function; and
5. the importance of the regulators recognising and engaging positively with European and international developments.
For further details of the responses and the governments current thinking click here.
Draft legislation is anticipated in early 2011, followed by a further round of consultation.
