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Seminar: The role of regulation in financial services
Topic Number: 8
Principles of Business
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OverviewOver the years the UK financial services industry has had a series of serious regulatory breaches ranging from endowment mortgages and PPI to the credit crisis. Many commentators have blamed the lack of regulatory oversight as a contributory factor to the enduring economic recession.
In this seminar, we will look at the role of regulation in financial services, paying close attention to the newly formed regulatory body; the FCA.
We will consider the role of the FCA in financial regulation and look specifically at what enforcement powers it has. Thereafter, we will look at the key principles that it adopts in order guide further action.
Given, financial services operates in a global environment we will evaluate how the FCA operates on an international scale. Finally, we will critically evaluate the success of the FCA since its inception in 2013.
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Learning outcomes of this seminar
• Describe the role of the FCA in regulating the financial services industry
• Determine and articulate the key principles that guide the FCA
• Evaluate and articulate how the FCA operate on an international scale
• Determine and describe the level of success the FCA has had since inception
Agenda for this seminar
What are the principles of good regulation?
How does the FCA operate internationally?
Evaluate the success of the FCA since inception
What is the role of the FCA in financial regulation?
Structure for the session
You will have 15 minutes to
discuss each question
We will have a de-brief at the end of each 15 minutes to hear your thoughts on each area
Feel free to ask questions but please do not have separate conversations ‘we are all in
this together’!
Introduction to the FCA
View video: https://www.youtube.com/watch?v=I8kXbEW7bPE
From FSA to FCA
In the wake of the financial crisis, the Financial Services Act of 2012 set out a new system for regulating financial services in order to protect and improve the UK’s economy.
Our purpose is to make sure markets work well so that consumers get a fair deal.
We maintain and ensure the integrity of the marketregulate financial services firms so that they give consumers a fair dealensure the financial services market is competitive
Source: FCA, 2014
Structure of the FCA
Source: FCA, 2014
What is the role of the FCA in financial
regulation?
What does the FCA do?
Source: FCA, 2014
What are their objectives?
Source: FCA, 2014
The FCA Remit
.
To ensure that the relevant markets function well.This responsibility has been set out for us by the Government,
according to the Financial Services Act 2012
To secure an appropriate degree of
protection for consumers
To protect and enhance the
integrity of the UK financial
system
To promote effective
competition in the interests of
consumers
To support this, they have three operational objectives:
Source: FCA, 2014
What are the principles of good
regulation?
8 Key Principles
Efficiency & Economy Proportionality
We need to use our resources in the most
efficient and economical way. As part of this the
Treasury can commission value-for-money reviews of
our operations.
We must ensure that any burden or restriction
that we impose on a person or activity is proportionate
to the benefits we expect as a result. To judge this, we
take into account the costs to firms and consumers.
Source: FCA, 2014
8 Key Principles
Sustainable growth Consumer responsibility
We must ensure there is a desire for sustainable
growth in the economy of the United Kingdom in the
medium or long term.
Consumers should take responsibility for their
decisions.
Source: FCA, 2014
8 Key Principles
Senior management responsibility
Recognising businesses carried out by different persons
A firm’s senior management is
responsible for the firm’s activities and for ensuring that its
business complies with regulatory requirements.
Where appropriate, we exercise our functions in a way that recognises
differences in the nature of, and objectives of, businesses
carried on by different persons subject to requirements
imposed by or under FSMA.
Source: FCA, 2014
8 Key Principles
Openness and disclosure Transparency
We should publish relevant market
information about regulated persons or
require them to publish it (with appropriate
safeguards).
We should exercise our functions as
transparently as possible. It is important that we
provide appropriate information on our
regulatory decisions, & that we are open &
accessible
Source: FCA, 2014
How does the FCA operate
internationally?
A globally coordinated effort
Bank for International Settlements
International Association of Insurance Supervisors
Financial Stability Board
International Organisation of Securities Commission
Source: FCA, 2014
Role of these bodies
These bodies aim to foster fair, efficient,
transparent and sound markets, by promoting
international co-operation and mutual
assistance, by developing the highest standards of regulation,
and by exchanging experience to help the
development of domestic markets.
They set international regulatory standards,
and promote the integrity of markets by
encouraging the implementation and enforcement of these
standards.
Source: FCA, 2014
EU Engagement
The FCA actively engages with the EU and devotes a significant share of its resources to working with European institutions and fellow EU regulators.
They do so because:
European Supervisory Authorities (ESAs) have significant powers to propose draft rules and to take decisions that are binding on national supervisors and firms.
Deepening the single market in financial services has involved a comprehensive legislative programme, which must then be implemented and applied in the UK.
The activities of cross-border firms require regulators to enhance their levels of co-operation and co-ordination, if regulatory duplication is to be avoided and risks are to be better identified, prioritised and mitigated.
Source: FCA, 2014
International Engagement and Assistance
As an international financial centre, the UK is host to a wide range of overseas firms and is home to financial markets that are highly integrated with the global economy. Many UK firms also have significant operations overseas. As a result, there is an important international dimension to our work.
The FCA is a signatory to the IOSCO and ESMA MoUs, and has entered into various other MoUs on a bilateral basis, which provide for international co-operation and the exchange of information.
Under the Financial Services and Markets Act 2000 (FSMA), the FCA has wide powers to compel the production of information, obtain documents and to require the attendance of persons at interviews. These powers may be exercised at the request of overseas regulators. The following will guide overseas regulators seeking the assistance of the FCA.
Source: FCA, 2014
Evaluate the success of the FCA thus far
Key Milestones of the FCA
Source: FCA, 2014
Milestones Achieved
Source: FCA, 2014
Building Integrity
Source: FCA, 2014
End of Seminar
Note: This recording is for your personal use only and not for further distribution or wider review.
© Pearson College 2013