Alternative Investment Management Association Representing the global hedge fund industry
In reaction to the shortcomings exposed by the financial crisis, the UK government has undertaken a significant reform of its financial services regulatory structure.
On 16 June 2011, a White Paper and a draft Financial Services Bill amending the Financial Services and Markets Act 2000 were published, providing details on the Government’s proposed reforms to the UK financial regulatory regime. This builds upon two previous consultations published by HM Treasury in July 2010 and February 2011.
The previous tripartite system of financial regulation involving the Financial Services Authority (FSA), Bank of England and the Treasury was considered to be flawed, as no single institution had the responsibility or tools to oversee the financial system as a whole. The White Paper, therefore, details a new structure to replace the previous system and provided for the creation of three new regulatory bodies: the Financial Policy Committee (FPC), the Prudential Regulatory Authority (PRA) and the Financial Conduct Authority (FCA).
The Bank of England now assumes responsibility for overall macro-prudential regulation, assisted by the FPC which monitors and responds to systemic risks. Responsibility for micro-prudential regulation is carried out by the PRA, an independent subsidiary of the Bank of England. Finally, the fully independent FCA focuses on conduct of business regulation across the whole financial services sector.
Response to FSA AND HMT - UK regulatory reform (August 2011)