Proposed Changes to the Financial Service Authority.

by Mark Johnston

Proposed Changes to the Financial Service Authority.

It seems that the financial crisis and the years that preceded it have now changed the philosophy behind regulation. In 2010 the chancellor, George Osborne, announced changes to the way that the financial services would be regulated.

As far as both consumers and some financial experts are concerned the financial Service Authority (FSA) has not been successful in recent years as amongst other things they failed to prevent the banking meltdown.

fsaThe Financial Services Authority (FSA) chairman, Lord Turner, stated that “the crisis demonstrated the need for new regulatory approaches and more intense supervision”.

Anthony Brown, chief executive officer at the British Bankers Association (BBA) also commented that “we all want a stable, customer focused banking system that can regain the public trust”.

The proposed change, due in 2013, was to divide the role of the Financial Services Authority (FSA) between the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA). The purpose of this split is to divide the way that firms are supervised.

This means that those firms who are ‘dual regulated’, such as banks, insurers and major investment firms will therefore become supervised by two independent groups instead of just the one.

The Prudential Regulation Authority (PRA) will be a subsidiary of the bank of England and will therefore be responsible for providing the stable and prudent operations of the financial system through regulation of all deposit taking institutions, insurers and investment banks.

The Financial Conduct Authority (FCA) will thus be responsible for regulation of conduct in retail as well as wholesale, financial markets and the infrastructure that supports those markets.

The new head of the Financial Conduct Authority (FCA), Martin Wheatley, has promised that “we will be looking at things from a consumer’s perspective”, he also added that they will have “expanded power to deal with firms”.

Both of these groups will work to different objectives and act separately, but they will of course coordinate internally with one another in order to share information and data.

Hector Sants, the Financial Services Authority (FSA) chief executive and the Prudential Regulation Authority (PRA) chief executive designate, said of the changes “in designing this new model we have incorporated both lessons learned from the last financial crisis and those from firm’s failures of the past”.

Experts believe that for these new changes to benefit consumers the Financial Conduct Authority (FCA) in particular needs to make better, bolder and faster decisions than the Financial Service Authority (FSA) did.

However, product providers and financial advisers have warned that these new systems will no doubted push up the cost for consumers.

The original aim was to implement these changes in the regulation structure by the beginning of 2013. However, it has now emerged that the treasury is struggling to complete this radical overhaul of the regulatory system with in this time frame.

Therefore in conclusion regulatory changes on this scale will inevitably impact current operations and processes. So it appears that only time will tell as to whether the proposals will amount to a significant departure from the current regime.




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