Bank and FSA set out regulatory framework
Share
The Bank of England and the Financial Services Authority (FSA) have published details of how the incoming ‘twin peaks’ micro-regulatory system will work in practice.
A draft Memorandum of Understanding (MoU) from the two institutions lays out how the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) will cooperate when pursuing their “very different” mandates.
The FCA is tasked with ensuring the financial services markets “function well” and is responsible for protecting consumers, enhancing the financial system’s integrity and promoting competition in the interests of consumers.
Meanwhile, the PRA will promote the safety and soundness of dual-regulated firms. Its responsibilities include prudential supervision of individual deposit takers, insurers and some investment firms.
The MoU notes that the two regulators have “separate and independent” mandates, which are established in the amended Financial Services and Markets Act, but seeks to develop a high-level framework for situations which place the FCA and the PRA under a duty to co-operate.
One of these areas is policy and rule making, as each watchdog is tasked with making regulations to support their separate objectives.
“The FCA and the PRA will consult each other at an early stage in relation to policy deliberations which might have a material effect on the other’s objectives,” the MoU says. “The regulators will seek to avoid incompatible requirements.”
Should rule-making conflicts arise that have a material impact on either regulator’s goals, the matter will be elevated to their chief executives and, if necessary, their boards.
The MoU establishes that the FCA will maintain a register covering all FCA and PRA-authorised firms and approved individuals. With regards to asset managers, the PRA must consult the FCA before designating an investment firm for prudential regulation or revoking such designation.
Details on how the two organisations will cooperate in the case of dual-regulated firms is also covered in the document. This is includes how the two will share information and how they will conduct supervisory activity.
To receive more relevant articles like this one, why not sign up to our briefings and breaking alerts by clicking here and Follow @fundweb
