Principles of Business
Seminar: The role of regulation in
financial services
Topic Number: 8
Overview
Over 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. 2
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
3
Agenda for this seminar
What is the role of the FCA in financial regulation?
What are the principles of good regulation?
How does the FCA operate internationally?
Evaluate the success of the FCA since inception
Structure for the session
Feel free to ask
We will have a
questions but
You will have de-brief at the
please do not
15 minutes to end of each 15
have separate
discuss each minutes to hear
conversations
question your thoughts
‘we are all in
on each area
this together’!
Introduction to the FCA
View video: [Link]
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 market
regulate financial services firms so that they give consumers a
fair deal
ensure 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 support this, they have three operational objectives:
To secure an To protect and To promote
appropriate enhance the effective
degree
. of integrity of the competition in
protection for UK financial the interests of
consumers system consumers
Source: FCA, 2014
What are the principles
of good regulation?
8 Key Principles
Efficiency & Economy Proportionality
We need to use our We must ensure that
resources in the most any burden or restriction
efficient and economical that we impose on a person
way. As part of this the or activity is proportionate
Treasury can commission to the benefits we expect as
value-for-money reviews of a result. To judge this, we
our operations. 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 Consumers should take
desire for sustainable responsibility for their
growth in the economy of decisions.
the United Kingdom in the
medium or long term.
Source: FCA,
2014
8 Key Principles
Senior management Recognising businesses carried
responsibility out by different persons
A firm’s senior Where appropriate,
we exercise our functions
management is
in a way that recognises
responsible for the firm’s differences in the nature of,
activities and for and objectives of, businesses
ensuring that its carried on by different persons
business complies with subject to requirements
regulatory requirements. imposed by or
under FSMA.
Source:
FCA, 2014
8 Key Principles
Openness and disclosure Transparency
We should publish We should exercise
relevant market our functions as
information about transparently as possible.
regulated persons or It is important that we
require them to publish provide appropriate
it (with appropriate information on our
safeguards). regulatory decisions, &
that we are open &
accessible
Source: FCA,
2014
How does the FCA
operate
internationally?
A globally coordinated effort
Financial Stability Bank for International
Board Settlements
International Association of International Organisation
Insurance Supervisors of Securities Commission
Source: FCA, 2014
Role of these bodies
These bodies aim to They set international
foster fair, efficient, regulatory standards,
transparent and sound and promote the
markets, by promoting integrity of markets by
international co- encouraging the
operation and mutual implementation and
assistance, by enforcement of these
developing the highest standards.
standards of regulation,
and by exchanging
experience to help the
development of
domestic markets.
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
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distribution or wider review.
© Pearson College 2013