The New Regulatory Framework in the Uk (post -2008)

CLASS Exercise 2: New Regulatory Framework (05 February 2018)

The new regulatory framework in the UK (post -2008)

FRE-class exercise 2

1. The three new institutions set up in the UK after the financial crisis in 2008 are ___

• Financial Policy Committee (FPC)：a new Financial Policy Committee (FPC) will be established in the Bank of England, with responsibility for ‘macro-prudential’ regulation, or regulation of stability and resilience of the financial system as a whole
• Prudential Regulation Authority (PRA)：an operationally independent subsidiary of the Bank of England, manage significant risks on their balance sheets will be carried out
• Financial Conduct Authority (FCA)：responsibility for conduct of business regulation will be transferred to FCA，the FCA will have responsibility for conduct issues across the entire spectrum of financial services

1. The Bank of England has a minor role to play in the new framework. True/False

• False.
• A fundamental objective of the Government’s reforms is to place the Bank of England (the Bank) at the heart of the financial system, bringing responsibility for all aspects of financial stability together within the Bank group

• the Financial Policy Committee (FPC), as a committee of the Bank’s Court of Directors (its governing body), will be responsible for delivering systemic financial stability through macro-prudential regulation;

• the Prudential Regulation Authority (PRA), as an operationally independent subsidiary of the Bank, will be responsible for oversight of the safety and soundness of banks, insurers and other prudentially significant firms; and
• other parts of the Bank of England will be responsible for crisis management, including the resolution of failed or failing banks under the special resolution regime (SRR), and regulation of key financial infrastructure such as payment and settlement systems and central counterparties (CCPs). In addition, as part of its central bank responsibilities, it will continue to provide liquidity insurance to the financial sector and, where appropriate, emergency liquidity assistance (ELA).

• a new judgement-led approach to financial stability, managed within a single institutional structure and building on the Bank’s market knowledge and economic expertise
• Bank will be able to identify interdependencies between different aspects of

financial stability and manage them effectively

5.  Is there a connection between the FCA and the PRA?

• 英国金融服务管理局（Financial Service Authority---FSA），该局于1997年10月由1985年成立的证券投资委员会（Securities and Investments Board---SIB组织）改组而成，作为独立的非政府组织，拟成为英国金融市场统一的监管机构，行使法定职责，直接向英国财政部负责。

由于2008年金融危机的影响，2012年1月19日，FSA被拆分为两个机构，一个为FCA（Financial Conduct Authority），另一个为PRA（Prudential Regulation Authority）。自此，FSA不复存在。

• The Government believes that the key to delivering effective coordination is to allow the PRA and FCA flexibility about how they engage with each other, rather than specifying onerous and bureaucratic processes in statute.
• Consultation respondents stressed that coordination arrangements should seek to avoid duplicate or uncoordinated requests by the PRA and FCA that could lead to significant additional regulatory burden on dual-regulated firms.
• The Government proposes that there should be a more positive and precisely specified legal duty on the PRA and FCA to coordinate their activities.

• where the PRA is considering action that may materially impact on the FCA’s achievement of its objective, it must consult the FCA for its views. Similarly, where the FCA is considering actions that may materially impact the PRA’s achievement of its objective, it must consult the PRA
• the PRA and FCA must consult each other where necessary, to take advantage of the other’s expertise
• both regulators will be subject to a requirement to ensure that processes involving both regulators are managed congruently and efficiently. This would include, for example, taking steps to coordinate or combine supervisory activities to reduce unnecessary burdens on dual-regulated firms

• The duty to coordinate will be supported by a requirement in legislation that the PRA and FCA should agree and publish a Memorandum of Understanding (MoU) setting out how they will deliver the duty.

• 8. false
• regulatory body include bank of England, FPC, PRA, FCA 第九页的图
• 9. true
• alongside the Bank’s current responsibilities under the special resolution regime and as a lender of last resort. By locating these distinct but complementary functions within the Bank of England group, the Government will ensure that systemic and firm-specific regulation are coordinated, and that the market knowledge and economic expertise of the central bank is fully brought to bear on financial stability.
• 10. false
• relationship between them is subsidiary 第九页图
• 12. significance

6.The PRA is solely responsible for prudential regulation in the UK     false

• 文中依据：second, ‘micro-prudential’ (that is, firm-specific) regulation financial institutions that manage significant risks on their balance sheets will be carried out by an operationally independent subsidiary of the Bank of England, the Prudential Regulation Authority (PRA);  （P4）

7.The FCA is solely responsible for conduct of business regulation in the UK.   True