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Regulatory Reform Programme

Mar 19 2012

Regulatory Reform Programme

Relevance:             All authorised firms.

Action required:     None – for information only.

There have been a number of developments in recent months concerning the forthcoming changes to the regulatory structure for financial services and although there is no call for any action at this stage, we felt it was worth bringing some of these to your attention.  This is now referred to as the Regulatory Reform Programme.

Remember, the government plans to transfer prudential supervision for banks, insurers and major investment firms to a subsidiary of the Bank of England, the Prudential Regulation Authority (PRA), and to rename the FSA the Financial Conduct Authority (FCA), which will focus on consumer protection and market regulation.

  • The so-called “twin peaks” style of regulation is intended to be up and running from early 2013;
  • The Financial Services Bill has been introduced to Parliament and Royal Assent is sought by the end of 2012;
  • From 02 April 2012, the FSA will split itself into its own version of “twin peaks” to replicate the PRA and the FCA;
  • Costs for regulatory reform are quoted as being in line with the initial forecast, between £130m and £175m.  The sum of £32.5m is allocated to this in the FSA budget for 2012/13;
  • Hector Sants, current chief executive of the FSA, gave an update on progress in a recent speech to the British Bankers’ Association, in which he:
    • Sees a change from a reactive (old style) to a proactive (new style) approach;
    • Suggested firms need to change the way they think about regulation;
    • Introduced another description of the new regulatory system as “forward-thinking, proactive, judgement-based supervision”;
    • States that “in future, the focus will be on whether the firms’ judgments and in particular their business model delivers good outcomes for consumers.”

So, while there is nothing for firms to do at this stage, we anticipate that there will be much more information and detail coming out as the year progresses.

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