UK Finance is the collective voice for the banking and finance industry. Representing more than 250 firms, we act to enhance competitiveness, support customers and facilitate innovation. We welcome the opportunity to respond to HM Treasury’s (HMT) first consultation on phase II of its future regulatory-framework (FRF) review.
The current regulatory framework was established more than 20 years ago by the Financial Services and Markets Act 2000 (FSMA). 2 The four main problems that it sought to address were set out in Gordon Brown’s first statement to Parliament as Chancellor of the Exchequer:
- the regulatory structure was not delivering the standard of supervision and investor protection that the industry and the public had a right to expect;
- the split of responsibility between regulatory and self-regulatory organisations was inefficient and confusing for investors and lacked accountability and a clear allocation of responsibilities;
- the distinctions between different types of financial institution were becoming increasingly blurred; and
- in a world of integrated global financial markets, the financial-services industry needed a regulator that could deliver the most effective supervision in the world.
FSMA has been heavily revised since, not least to give the Bank of England (BoE) a statutory role in the oversight of payment systems, 4 to replace the Financial Services Authority (FSA) with the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) 5 and to create the Payment Systems Regulator (PSR).6 The statute book and regulatory rules have also increasingly reflected European Union (EU) legislation as its competence and willingness to act increased, particularly after the global financial crisis. Nonetheless, the underpinning structure of independent regulators acting within a legislative framework determined by the UK Parliament and elaborated by the UK Government has endured, even if multiple public-sector bodies now regulate financial-services firms in ways that frequently overlap.
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