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Financial services
Regulation and reform
A stable financial services sector is essential for the economy, business, investors and consumers. Maintaining financial stability is, therefore, a key objective of HM Treasury. The Government believes that the current system of financial regulation has key weaknesses, and has set out proposals to replace this with a new regulatory framework. This will give the Bank of England control of overarching macro-prudential supervision of the financial system and oversight of day-to-day micro-prudential supervision of financial services firms.
Agenda
In his 2010 Mansion House speech, Chancellor George Osborne set out his agenda for reforming the current system of financial regulation. The current system – which shares responsibility for financial stability between the Treasury, the Bank of England and the Financial Services Authority (FSA) – will be replaced with a new system, and the FSA will cease to exist in its current form.
The legislation to implement the reforms will establish a Financial Policy Committee (FPC) in the Bank of England with a dedicated focus on identifying and managing macroeconomic and other risks to the stability of the financial services sector. It will also create a new Prudential Regulation Authority (as a subsidiary of the Bank of England), responsible for the day-to-day prudential supervision of financial institutions, and a Financial Conduct Authority (FCA) with responsibility for the conduct of all financial services firms.
The Government also recognises that the UK banking sector has become increasingly concentrated. To address this, former Bank of England economist, Sir John Vickers, has agreed to chair a new Independent Commission on Banking. Four commissioners - Martin Taylor, Claire Spottiswoode, Martin Wolf and Bill Winters - will support Sir John Vickers. The Commission will investigate the structure of the banking system and assess measures to promote increased competition and financial stability.
Regulatory reform is also underway at an international and European level. The Government continues to engage in international meetings such as the G20 to help shape future financial services regulation, and provide the foundation for a healthy and sustainable macroeconomy.
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