Summary
In 'A New Approach to Financial Regulation: The Blueprint for Reform’ (Cm. 8083), the Government outlines ambitious plans to reform UK financial regulation through the creation of specialist regulatory bodies.
Following on from consultation in February and with continuing policy development by the Treasury, the Bank of England and Financial Services Authority, the Government intends to promote the role of judgement and expertise with new regulators.
Proposed regulatory bodies include:
- The Financial Policy Committee (FPC) - a new macro-prudential regulator within the Bank of England, responsible for financial stability;
- Prudential Regulation Authority (PRA) - responsible for prudential regulation; and
- Financial Conduct Authority (FCA) - responsible for conduct of business.
Final responsibility for the overall regulatory framework, and the protection of the public finances remains with the Treasury and the Chancellor of the Exchequer.
An Independent Commission on Banking has also been established to consider what steps should be taken to deal with systemically important banks, alongside the question of whether and how competition in the banking sector should be improved.
The Commission proposes:
- that the most systemically important banks hold additional capital to the Basel III minimum, to make them better at absorbing losses and less likely to fail;
- 'bail-in' instead of bail-out - so that private investors, not taxpayers, bear the losses if things do go wrong; and
- putting a ring-fence around high street banking to make it safer and easier to allow a bank to fail without disrupting crucial banking services.
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