Financial services policy agenda
A responsibly managed and well-regulated financial services sector is essential to the success of the British economy. The Government has announced a range of reforms to improve domestic financial regulation, ensuring that regulation in future encourages a fair, diverse, competitive and stable financial sector.
Financial Services Act 2012
The Financial Services Act 2012, which received Royal Assent in late December 2012, gives effect to the commitment in the Coalition Agreement to abolish the Financial Services Authority (FSA) and transfer its prudential supervisory powers to the Bank of England, including:
- establishing a macro-prudential authority, the Financial Policy Committee (FPC) (within the Bank of England) to monitor and respond to systemic risks;
- transferring responsibility for prudential regulation to a focused new regulator, the Prudential Regulation Authority (PRA) established as a subsidiary of the Bank of England;
- establishing a focused new conduct of business regulator the Financial Conduct Authority (FCA) to ensure that business across financial services and markets is conducted in a way that advances the interests of all users and participants; and
- bringing the LIBOR benchmark into regulation, delivering the recommendations of the Wheatley Review.
The new authorities created by the Financial Services Act 2012 will come into existence on 1 April 2013, and more information is available here.
The Financial Services Act 2012 was preceded by a number of public consultations, which you can view here:
The Government has also consulted on the key secondary legislation under the Act, and laid the Statutory Instruments. These consultations are available here:
Banking Reform Bill
The Government has considered the recommendations of the Independent Commission on Banking chaired by Sir John Vickers - set up to investigate the structure and competition of UK banks and published its response to the recommendations on 19 December 2011.
The Government broadly accepted the Commission’s recommendations, including those on ring-fencing, loss-absorbency, resolvability (of banks and investment banks), competition, and the regulation of payment systems. The Government has also agreed to the ICB’s recommended implementation timetable, and will bring forward legislation in this Parliament, so that the measures will be in place by 2019. Legislation to implement many of these measures is being brought forward in the Financial Services (Banking Reform) Bill. The draft Bill has undergone pre-legislative scrutiny by the Parliamentary Commission on Banking Standards (PCBS), which reported in December 2012. The Government is considering the recommendations of the PCBS and will introduce the Bill to Parliament shortly. The Government has committed to have all legislation in place by 2015.
Further information can be found in the Independent Commission on Banking section of this website. In addition, in the Spending Review (November 2010), the Chancellor underlined the Government’s commitment to ensuring that the banking sector has in place strong governance around taxation. The Chancellor made clear that he expected the banking sector to comply with the Code of Practice on Taxation by the end of November 2010. All 15 of the major UK banks have since signed up.
The Code encourages banks to adopt ‘best practice’ in relation to their tax affairs, and takes a preventative approach to tax avoidance. While recognising that banks should undertake appropriate tax planning to support their business needs, the Code makes clear that the outcome of tax planning should not run contrary to the intentions of Parliament.
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