• Skip Navigation
• Help |
• Contact us |
• Privacy and Cookies |
• Site map |
• A-Z

Financial services

Home >  Financial services >  Financial services policy agenda > Reforming UK financial regulation

• Home 
• Budget  
• Newsroom & speeches  
• Economic data  
• Consultations & legislation  
• Independent reviews  
• Financial services  
• • Financial services policy agenda  
  • Financial stability  
  • World-class financial centre  
  • Europe & International: the agenda for financial services  
  • Financial services and the consumer  
  • Financial sanctions  
  • The Financial Services Act  
  • Credit easing  
  • The HMT website is moving to GOV.UK  
  • Equitable Life  
  • Anti-money laundering & counter terrorist finance  
• Infrastructure  
• International issues  
• Public spending & reporting  
• Taxation, work and welfare  
• UK economy  
• About us  

Reforming UK financial regulation

The Government believes that the current system of financial regulation has key weaknesses, and has committed to replacing this with a new regulatory framework. The Financial Services Act, (which received Royal Assent on 19 December 2012) establishes this framework. (Further information can be found in the Financial Services section of this website.)

At present, no single institution has the responsibility, authority and tools to monitor the financial system as a whole, and respond accordingly. That power will now be given to the Bank of England.

The Financial Services Act 2012 creates a new Financial Policy Committee (FPC) within the Bank, which will look at the wider economic and financial risks to the stability of the system. In advance of the passage of legislation, an interim FPC has been established by the Treasury and the Bank. This body will undertake, as far as possible before formal legal powers are created, the FPC’s role of identifying and monitoring risks to the financial system as a whole.

The reforms will also introduce greater judgement and focus to regulation of financial firms. The Financial Services Authority (FSA) will cease to exist in its current form, and the Act creates two new focused financial regulators:

• A new Prudential Regulation Authority (PRA) will be responsible for the day-to-day supervision of financial institutions that manage significant risk on their balance sheet. It will adopt a more judgement-focused approach to regulation so that business models can be challenged, risks identified and action taken to preserve financial stability.
• An independent conduct of business regulator, the Financial Conduct Authority (FCA), will take a tough approach to regulating how firms conduct their business. It will have a strong mandate for promoting confidence and transparency in financial services and to give greater protection for consumers of financial services. It will also have a strong role in promoting competition.
• Financial Services Act

Financial regulation consultations

The Government has carried out three consultations on the proposals which then formed the basis of the Act. Links to these can be found below.

• A new approach to financial regulation: judgement, focus and stability: Consultation document, responses and a summary of responses
• A new approach to financial regulation: building a stronger system
• A new approach to financial regulation: the blueprint for reform

Secondary legislation

The Act will be underpinned by a number of pieces of secondary legislation. More information on this is available here:

A new approach to financial regulation: draft secondary legislation

Consultation on this closed on 24 December 2012.

Information on the Financial Policy Committee's macro-prudential tools can be found here:

Financial Services Bill: the Financial Policy Committee's macro-prudential tools

Consultation on this closed on 11 December 2012.

Back to top

Share