The FSA has used its recently published 2011/2012 Business Plan as an opportunity to set out the steps it is taking towards regulatory reform, which must be finalised by 2013. It has listed the key areas for its incoming work programme which has been restructured to align with legislation currently before Parliament and the Financial Services Bill.
These key areas are:
• Maintaining ongoing supervision in a period of continued fragility in the market.
• Continuing to influence the international and European policy forums, delivering in particular the new prudential regulatory agenda.
• Implementing the current European Union major policy initiatives, including Solvency II
• Delivering on the principal national sector initiatives to improve consumer protection - the retail distribution review and mortgage market review.
• Continuing to improve the FSA's operating systems and quality of staff.
• Implementing the government's regulatory reform agenda.
Along with the FSA's new statutory objective of delivering financial stability, the business plan is aligned with its existing objectives of delivering market confidence, consumer protection and a reduction of financial crime in turn with delivering the FSA's operational platform to move to the new regime.
The FSA will be divided into two new authoritative bodies, the Prudential Regulation Authority and the Financial Conduct Authority. The government has said that it expects the new authorities to be operational by 2013. The FSA states in the business plan that it has started moving towards the new structure with the replacement of its current risk and supervision business units with the Prudential Business Unit and a Conduct Business Unit..
The PRA operates as part of the Bank of England and will be responsible for the prudential supervision of about 2200 firms. Its objective is to contribute to the promotion of the stability of the UK financial system by regulating individual financial firms and minimising any disruptions caused if they fail. It will also work with the FCA and others to ensure the UK authorities have a strong voice in international policy making.
The FCA will be based on the legal entity of the FSA. Its objective will be to protect and enhance confidence in the UK financial system. Among other responsibilities it will focus on firms' dealings with customers, monitor firms' compliance with market abuse, prosecute for insider dealing and take on the responsibilities of the UK Listing Authority. It will also oversee the Financial Ombudsman Service, the Consumer Financial Education Body and the Financial Services Compensation Scheme.
Creating the PRA is going to cost between £75m and £250m and creating the FCA between £15m and £25m. This includes the preparatory work that already has taken place and further work such as IT and staff transfer expenses.
With the amendment of Financial Services and Markets Act under the Financial Services Act 2010, the FSA is required to contribute to the protection and enhancement of the stability of the UK financial system. According to the business plan, the FSA will do this by ensuring the firms regulated are robust and reducing the probability that the regulated firms might fail. This will be done by ensuring firms strengthen their capital and liquidity regimes, systems, controls and governance. Further support to the UK financial system will derive from continued active participation in different forums and institutions, such as the Bank and the Treasury.
Part of delivering financial stability is co-operating and developing national and international policy. The FSA's aim is to ensure that good regulation is created and applied consistently across international jurisdictions. Early engagement with other regulators and sharing valuable knowledge will allow the FSA to influence policy decision-making.
The establishment of European Supervisory Authorities in January 2011 is a major change in the way regulation takes place at EU level. The FSA plays a supervisory role in the rule-making process of these authorities and in the future it will be important for the UK to continue having a strong voice in this process. Another significant change is the FSA's new focus on prudential regulation to assist in delivering financial stability. Whereas the FSA used to crack down on banks for individual conduct of business failures, the FSA is now taking a step back and implementing capital requirements that will regulate banks from a macro-prudential perspective.
In the past the FSA has addressed this matter with a regulatory framework that focuses on fair disclosure to consumers, supervision in systems and controls and taking enforcement action when a consumer has suffered detriment. However going forward the FSA will put further work into the MMR and the RDR to achieve a sustainable market.
It seems times are tough for the FSA as the Bank is slowly taking its powers away and dividing its powers and responsibilities among successor authorities. The FSA is trying to continue focusing on the job at hand in assisting firms recovering from the financial crisis and penalising firms for misusing their powers as well as behaving co-operatively towards the changes taking place. Perhaps this is not the best time to be going through these transitions, but when is there a good time? Although a lot of the financial crisis has been outlived, it is not yet over. Low interest rates mean downward pressure on margins but acts as a sticking plaster on consumer detriment as the low interest rates suppresses loan defaults. The plaster may be ripped off later this year with expected increases in interest rates. Perhaps the FSA needs to focus on making sure that firms recover safely from the aftermath of the financial crisis and then think about future changes.
With that in mind is it too soon for the Bank to be spending so much money for these changes when now may not be the right time? The changes seem to come more as a result of the financial crisis than as a progressive development strategy for the FSA and the Bank. Also it is not only the Bank spending the money to implement these changes. Firms will have to incur costs to ensure they are in line with new regulations and that they have the right business structure and staff to cope with the changes.
On the other hand there may never be an ideal time to implement these changes and perhaps it is better to get started sooner rather than later. Change is never accepted easily. When the FSA came into power it was heavily criticised as having the potential to wield too much power in the hands of a regulator. Now it seems, with the rhetoric of 'credible deterrence', it cannot have enough. That means firms will face a tougher regulator less likely to view favourably a firm taking a commercial view on its rules or guidance. Therefore it is highly likely that the current changes will be criticised just as much and the new authoritative bodies praised just as much.
Suzanne MacDonald is partner and head of financial services regulation for law firm TLT
The FSA has used its recently published 2011/2012 Business Plan as an opportunity to set out the steps it is taking towards regulatory reform, which must be finalised by 2013. It has listed the key areas for its incoming work programme which has been restructured to align with legislation currently before Parliament and the Financial Services Bill.
These key areas are:
• Maintaining ongoing supervision in a period of continued fragility in the market.
• Continuing to influence the international and European policy forums, delivering in particular the new prudential regulatory agenda.
• Implementing the current European Union major policy initiatives, including Solvency II
• Delivering on the principal national sector initiatives to improve consumer protection - the retail distribution review and mortgage market review.
• Continuing to improve the FSA's operating systems and quality of staff.
• Implementing the government's regulatory reform agenda.
Along with the FSA's new statutory objective of delivering financial stability, the business plan is aligned with its existing objectives of delivering market confidence, consumer protection and a reduction of financial crime in turn with delivering the FSA's operational platform to move to the new regime.
The FSA will be divided into two new authoritative bodies, the Prudential Regulation Authority and the Financial Conduct Authority. The government has said that it expects the new authorities to be operational by 2013. The FSA states in the business plan that it has started moving towards the new structure with the replacement of its current risk and supervision business units with the Prudential Business Unit and a Conduct Business Unit..
The PRA operates as part of the Bank of England and will be responsible for the prudential supervision of about 2200 firms. Its objective is to contribute to the promotion of the stability of the UK financial system by regulating individual financial firms and minimising any disruptions caused if they fail. It will also work with the FCA and others to ensure the UK authorities have a strong voice in international policy making.
The FCA will be based on the legal entity of the FSA. Its objective will be to protect and enhance confidence in the UK financial system. Among other responsibilities it will focus on firms' dealings with customers, monitor firms' compliance with market abuse, prosecute for insider dealing and take on the responsibilities of the UK Listing Authority. It will also oversee the Financial Ombudsman Service, the Consumer Financial Education Body and the Financial Services Compensation Scheme.
Creating the PRA is going to cost between £75m and £250m and creating the FCA between £15m and £25m. This includes the preparatory work that already has taken place and further work such as IT and staff transfer expenses.
With the amendment of Financial Services and Markets Act under the Financial Services Act 2010, the FSA is required to contribute to the protection and enhancement of the stability of the UK financial system. According to the business plan, the FSA will do this by ensuring the firms regulated are robust and reducing the probability that the regulated firms might fail. This will be done by ensuring firms strengthen their capital and liquidity regimes, systems, controls and governance. Further support to the UK financial system will derive from continued active participation in different forums and institutions, such as the Bank and the Treasury.
Part of delivering financial stability is co-operating and developing national and international policy. The FSA's aim is to ensure that good regulation is created and applied consistently across international jurisdictions. Early engagement with other regulators and sharing valuable knowledge will allow the FSA to influence policy decision-making.
The establishment of European Supervisory Authorities in January 2011 is a major change in the way regulation takes place at EU level. The FSA plays a supervisory role in the rule-making process of these authorities and in the future it will be important for the UK to continue having a strong voice in this process. Another significant change is the FSA's new focus on prudential regulation to assist in delivering financial stability. Whereas the FSA used to crack down on banks for individual conduct of business failures, the FSA is now taking a step back and implementing capital requirements that will regulate banks from a macro-prudential perspective.
In the past the FSA has addressed this matter with a regulatory framework that focuses on fair disclosure to consumers, supervision in systems and controls and taking enforcement action when a consumer has suffered detriment. However going forward the FSA will put further work into the MMR and the RDR to achieve a sustainable market.
It seems times are tough for the FSA as the Bank is slowly taking its powers away and dividing its powers and responsibilities among successor authorities. The FSA is trying to continue focusing on the job at hand in assisting firms recovering from the financial crisis and penalising firms for misusing their powers as well as behaving co-operatively towards the changes taking place. Perhaps this is not the best time to be going through these transitions, but when is there a good time? Although a lot of the financial crisis has been outlived, it is not yet over. Low interest rates mean downward pressure on margins but acts as a sticking plaster on consumer detriment as the low interest rates suppresses loan defaults. The plaster may be ripped off later this year with expected increases in interest rates. Perhaps the FSA needs to focus on making sure that firms recover safely from the aftermath of the financial crisis and then think about future changes.
With that in mind is it too soon for the Bank to be spending so much money for these changes when now may not be the right time? The changes seem to come more as a result of the financial crisis than as a progressive development strategy for the FSA and the Bank. Also it is not only the Bank spending the money to implement these changes. Firms will have to incur costs to ensure they are in line with new regulations and that they have the right business structure and staff to cope with the changes.
On the other hand there may never be an ideal time to implement these changes and perhaps it is better to get started sooner rather than later. Change is never accepted easily. When the FSA came into power it was heavily criticised as having the potential to wield too much power in the hands of a regulator. Now it seems, with the rhetoric of 'credible deterrence', it cannot have enough. That means firms will face a tougher regulator less likely to view favourably a firm taking a commercial view on its rules or guidance. Therefore it is highly likely that the current changes will be criticised just as much and the new authoritative bodies praised just as much.
Suzanne MacDonald is partner and head of financial services regulation for law firm TLT
Source: http://www.ftadviser.com
These key areas are:
• Maintaining ongoing supervision in a period of continued fragility in the market.
• Continuing to influence the international and European policy forums, delivering in particular the new prudential regulatory agenda.
• Implementing the current European Union major policy initiatives, including Solvency II
• Delivering on the principal national sector initiatives to improve consumer protection - the retail distribution review and mortgage market review.
• Continuing to improve the FSA's operating systems and quality of staff.
• Implementing the government's regulatory reform agenda.
Along with the FSA's new statutory objective of delivering financial stability, the business plan is aligned with its existing objectives of delivering market confidence, consumer protection and a reduction of financial crime in turn with delivering the FSA's operational platform to move to the new regime.
The FSA will be divided into two new authoritative bodies, the Prudential Regulation Authority and the Financial Conduct Authority. The government has said that it expects the new authorities to be operational by 2013. The FSA states in the business plan that it has started moving towards the new structure with the replacement of its current risk and supervision business units with the Prudential Business Unit and a Conduct Business Unit..
The PRA operates as part of the Bank of England and will be responsible for the prudential supervision of about 2200 firms. Its objective is to contribute to the promotion of the stability of the UK financial system by regulating individual financial firms and minimising any disruptions caused if they fail. It will also work with the FCA and others to ensure the UK authorities have a strong voice in international policy making.
The FCA will be based on the legal entity of the FSA. Its objective will be to protect and enhance confidence in the UK financial system. Among other responsibilities it will focus on firms' dealings with customers, monitor firms' compliance with market abuse, prosecute for insider dealing and take on the responsibilities of the UK Listing Authority. It will also oversee the Financial Ombudsman Service, the Consumer Financial Education Body and the Financial Services Compensation Scheme.
Creating the PRA is going to cost between £75m and £250m and creating the FCA between £15m and £25m. This includes the preparatory work that already has taken place and further work such as IT and staff transfer expenses.
With the amendment of Financial Services and Markets Act under the Financial Services Act 2010, the FSA is required to contribute to the protection and enhancement of the stability of the UK financial system. According to the business plan, the FSA will do this by ensuring the firms regulated are robust and reducing the probability that the regulated firms might fail. This will be done by ensuring firms strengthen their capital and liquidity regimes, systems, controls and governance. Further support to the UK financial system will derive from continued active participation in different forums and institutions, such as the Bank and the Treasury.
Part of delivering financial stability is co-operating and developing national and international policy. The FSA's aim is to ensure that good regulation is created and applied consistently across international jurisdictions. Early engagement with other regulators and sharing valuable knowledge will allow the FSA to influence policy decision-making.
The establishment of European Supervisory Authorities in January 2011 is a major change in the way regulation takes place at EU level. The FSA plays a supervisory role in the rule-making process of these authorities and in the future it will be important for the UK to continue having a strong voice in this process. Another significant change is the FSA's new focus on prudential regulation to assist in delivering financial stability. Whereas the FSA used to crack down on banks for individual conduct of business failures, the FSA is now taking a step back and implementing capital requirements that will regulate banks from a macro-prudential perspective.
In the past the FSA has addressed this matter with a regulatory framework that focuses on fair disclosure to consumers, supervision in systems and controls and taking enforcement action when a consumer has suffered detriment. However going forward the FSA will put further work into the MMR and the RDR to achieve a sustainable market.
It seems times are tough for the FSA as the Bank is slowly taking its powers away and dividing its powers and responsibilities among successor authorities. The FSA is trying to continue focusing on the job at hand in assisting firms recovering from the financial crisis and penalising firms for misusing their powers as well as behaving co-operatively towards the changes taking place. Perhaps this is not the best time to be going through these transitions, but when is there a good time? Although a lot of the financial crisis has been outlived, it is not yet over. Low interest rates mean downward pressure on margins but acts as a sticking plaster on consumer detriment as the low interest rates suppresses loan defaults. The plaster may be ripped off later this year with expected increases in interest rates. Perhaps the FSA needs to focus on making sure that firms recover safely from the aftermath of the financial crisis and then think about future changes.
With that in mind is it too soon for the Bank to be spending so much money for these changes when now may not be the right time? The changes seem to come more as a result of the financial crisis than as a progressive development strategy for the FSA and the Bank. Also it is not only the Bank spending the money to implement these changes. Firms will have to incur costs to ensure they are in line with new regulations and that they have the right business structure and staff to cope with the changes.
On the other hand there may never be an ideal time to implement these changes and perhaps it is better to get started sooner rather than later. Change is never accepted easily. When the FSA came into power it was heavily criticised as having the potential to wield too much power in the hands of a regulator. Now it seems, with the rhetoric of 'credible deterrence', it cannot have enough. That means firms will face a tougher regulator less likely to view favourably a firm taking a commercial view on its rules or guidance. Therefore it is highly likely that the current changes will be criticised just as much and the new authoritative bodies praised just as much.
Suzanne MacDonald is partner and head of financial services regulation for law firm TLT
The FSA has used its recently published 2011/2012 Business Plan as an opportunity to set out the steps it is taking towards regulatory reform, which must be finalised by 2013. It has listed the key areas for its incoming work programme which has been restructured to align with legislation currently before Parliament and the Financial Services Bill.
These key areas are:
• Maintaining ongoing supervision in a period of continued fragility in the market.
• Continuing to influence the international and European policy forums, delivering in particular the new prudential regulatory agenda.
• Implementing the current European Union major policy initiatives, including Solvency II
• Delivering on the principal national sector initiatives to improve consumer protection - the retail distribution review and mortgage market review.
• Continuing to improve the FSA's operating systems and quality of staff.
• Implementing the government's regulatory reform agenda.
Along with the FSA's new statutory objective of delivering financial stability, the business plan is aligned with its existing objectives of delivering market confidence, consumer protection and a reduction of financial crime in turn with delivering the FSA's operational platform to move to the new regime.
The FSA will be divided into two new authoritative bodies, the Prudential Regulation Authority and the Financial Conduct Authority. The government has said that it expects the new authorities to be operational by 2013. The FSA states in the business plan that it has started moving towards the new structure with the replacement of its current risk and supervision business units with the Prudential Business Unit and a Conduct Business Unit..
The PRA operates as part of the Bank of England and will be responsible for the prudential supervision of about 2200 firms. Its objective is to contribute to the promotion of the stability of the UK financial system by regulating individual financial firms and minimising any disruptions caused if they fail. It will also work with the FCA and others to ensure the UK authorities have a strong voice in international policy making.
The FCA will be based on the legal entity of the FSA. Its objective will be to protect and enhance confidence in the UK financial system. Among other responsibilities it will focus on firms' dealings with customers, monitor firms' compliance with market abuse, prosecute for insider dealing and take on the responsibilities of the UK Listing Authority. It will also oversee the Financial Ombudsman Service, the Consumer Financial Education Body and the Financial Services Compensation Scheme.
Creating the PRA is going to cost between £75m and £250m and creating the FCA between £15m and £25m. This includes the preparatory work that already has taken place and further work such as IT and staff transfer expenses.
With the amendment of Financial Services and Markets Act under the Financial Services Act 2010, the FSA is required to contribute to the protection and enhancement of the stability of the UK financial system. According to the business plan, the FSA will do this by ensuring the firms regulated are robust and reducing the probability that the regulated firms might fail. This will be done by ensuring firms strengthen their capital and liquidity regimes, systems, controls and governance. Further support to the UK financial system will derive from continued active participation in different forums and institutions, such as the Bank and the Treasury.
Part of delivering financial stability is co-operating and developing national and international policy. The FSA's aim is to ensure that good regulation is created and applied consistently across international jurisdictions. Early engagement with other regulators and sharing valuable knowledge will allow the FSA to influence policy decision-making.
The establishment of European Supervisory Authorities in January 2011 is a major change in the way regulation takes place at EU level. The FSA plays a supervisory role in the rule-making process of these authorities and in the future it will be important for the UK to continue having a strong voice in this process. Another significant change is the FSA's new focus on prudential regulation to assist in delivering financial stability. Whereas the FSA used to crack down on banks for individual conduct of business failures, the FSA is now taking a step back and implementing capital requirements that will regulate banks from a macro-prudential perspective.
In the past the FSA has addressed this matter with a regulatory framework that focuses on fair disclosure to consumers, supervision in systems and controls and taking enforcement action when a consumer has suffered detriment. However going forward the FSA will put further work into the MMR and the RDR to achieve a sustainable market.
It seems times are tough for the FSA as the Bank is slowly taking its powers away and dividing its powers and responsibilities among successor authorities. The FSA is trying to continue focusing on the job at hand in assisting firms recovering from the financial crisis and penalising firms for misusing their powers as well as behaving co-operatively towards the changes taking place. Perhaps this is not the best time to be going through these transitions, but when is there a good time? Although a lot of the financial crisis has been outlived, it is not yet over. Low interest rates mean downward pressure on margins but acts as a sticking plaster on consumer detriment as the low interest rates suppresses loan defaults. The plaster may be ripped off later this year with expected increases in interest rates. Perhaps the FSA needs to focus on making sure that firms recover safely from the aftermath of the financial crisis and then think about future changes.
With that in mind is it too soon for the Bank to be spending so much money for these changes when now may not be the right time? The changes seem to come more as a result of the financial crisis than as a progressive development strategy for the FSA and the Bank. Also it is not only the Bank spending the money to implement these changes. Firms will have to incur costs to ensure they are in line with new regulations and that they have the right business structure and staff to cope with the changes.
On the other hand there may never be an ideal time to implement these changes and perhaps it is better to get started sooner rather than later. Change is never accepted easily. When the FSA came into power it was heavily criticised as having the potential to wield too much power in the hands of a regulator. Now it seems, with the rhetoric of 'credible deterrence', it cannot have enough. That means firms will face a tougher regulator less likely to view favourably a firm taking a commercial view on its rules or guidance. Therefore it is highly likely that the current changes will be criticised just as much and the new authoritative bodies praised just as much.
Suzanne MacDonald is partner and head of financial services regulation for law firm TLT
Source: http://www.ftadviser.com
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