UK regulatory reform

The FSA is being broken up into the Prudential Regulation Authority (‘PRA’), as a subsidiary of the Bank of England, and a new Consumer Protection and Markets Authority (‘CPMA’). A two year transition process is underway with Hector Sants to become the head of the PRA.

Hector Sants mentioned in his recent speech (see link) that all the major policy initiatives of the FSA will be taken forward into the new structure and that the intensive supervisory approach will continue in the new organisational framework.

According to Lord Turner, who will remain Chairman at the FSA during the transition and UK regulatory reform, ‘there will be a high degree of continuity which builds on the new supervisory techniques’. Please see the ‘FSA Chairman’s speech’ article in this Regulatory Roundup for further information of Turner’s speech.

On the same day as the speeches by Sants and Turner, Sheila Nicoll also reinforced the same message by saying, ‘the changes announced by the government are about regulatory structures, not the substance of what we do’.

Jon Pain, Managing Director of Supervision at the FSA, has indicated that there will not be a suitable role for him in the new structure (Pain was, reportedly, to be head of the FSA following Sants expected departure) and will be leaving the FSA in January 2011. Sally Dewar, Managing Director of Risk at the FSA, has also announced that she will be leaving the FSA (in March 2011).

Other reforms in the financial services industry include the Bank of England’s newly created Financial Policy Committee (‘FPC’), which will be responsible for macro-prudential regulation.

It should be remembered that any changes that Mr Osborne hopes to implement to the way ‘macro-prudential’ matters and risk are approached will still have to fit in with Europe’s wishes (see ‘European Supervision – All Change’ in Regulatory Roundup #15).

A new Economic Crime Agency will also be created for the function that was previously dealt with by a number of different entities such as the Serious Fraud Office and the FSA.

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