Introduction
The UK Financial Services Act of 2012 was put into effect the 1st of April 2013 and contained the government reforms on the financial regulatory structure in the United Kingdom. This Act gave new guidelines for management of the banking sector and other supervisory roles in the financial services sector, which include the following. The oversight role of the Bank of England was bestowed therefore, it is expected to be responsible for the occurrences in the financial system and how financial institutions manage themselves. Moreover, the Act stipulates that three more bodies are to be formed to assist in managing this sector, these include; the Financial Policy Committee (FPC), Prudential Regulatory Authority (PRA) and
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The FPC has mandates with different bodies, it is responsable for directing the other two committees (PRA and FCA) on the matters to do with the macro-prudential regulations as well as making the relevant recommendations to the Bank of England and other committees to keep record of the financial stability (Noked, 2013). Indeed, the FPC is within the Bank of England. Apart from identifying risks that could possibly affect the sector, the committee makes sure that they are addressed in the best possible way. An important feature of the FPC is that it has the power to increase the capital that banks in the UK should have during a certain period of time according to the state of the economy (UK Government, 2015).
Impacts of the Prudential Regulatory Authority
The Prudential Regulatory Authority (PRA) is the macro-prudential regulatory body, which is expected to ensure that there is a well-regulated structure for deposit takers, insurance bodies and the investment firms in the UK. Its main objective is to make sure that there is a safe operation in these entities, which is expected to be attained via preventing unfavourable effects of their activities or of the financial sector as a whole. Furthermore, the PRA is in charge of reducing the effects of disruptions on financial services
Prior to the financial crisis, the overall responsibility for financial oversight was divided among several different agencies. These agencies and their “varying rules and standards led to certain entities not being regulated at all, with others subject to less oversight than their peer
There are various categories of banking; these include retail banking, directly dealing with small businesses and persons. Commercial and Corporate banking which offers services to medium and large businesses (Koch & MacDonald 2010). Private banking, deals with individuals, offering them one on one service. The last category is investment banking. These help clients to raise capital and often invest in financial markets. Most global banking institutions provide all these services combined. With all these institutions in existence within the same localities and offering similar services, there is a need to regulate the industry so as to protect the consumer and provide fair working environment for all banks (Du & Girma, 2011).
Before the advent of the Federal Deposit Insurance Corporation (FDIC) in 1933 and the general conception of government safety nets, the United States banking industry was quite different than it is today. Depositors assumed substantial default risk and even the slightest changes in consumer confidence could result in complete turmoil within the banking world. In addition, bank managers had almost complete discretion over operations. However, today the financial system is among the most heavily government- regulated sectors of the U.S. economy. This drastic change in public policy resulted directly from the industry’s numerous pre-regulatory failures and major disruptions that produced severe economic and social
15. The prudential regulator of banks in Canada is responsible for: A) ensuring the stability of interest rates. B) ensuring that banks treat customers ethically and fairly. C) ensuring that banks are solvent and adopt appropriate risk management. D) ensuring that banks report suspected money laundering activities. E) none of the above.
The government regulation of the financial industry by the Dodd-Frank Act was the most compelling topic of this class. A financial regulatory process was created which limits risk through the enforcement of transparency and accountability. The main objective of the Dodd-Frank Act was to provide regulation to banks that was more stringent. The FSOC was created as a result of the Dodd-Frank Act. The two main objectives of the FSCO was to stop the occurrence of another recession and to resolve persistent issues. The elimination of bailouts funded by taxpayers was another important element of this act. The CFPB also known as the Consumer Financial Protection Bureau was created as a result of the act. The consolidation of consumer protection responsibilities
The Dodd-Frank Wall Street Reform and Consumer Protection Act was signed to redesign numerous areas of the US regulatory system and to protect consumers against mortgage companies, banks, and other entities that were gambling and taking excessive risks with the consumers’ financial assets7. The act promised to restore America and create new jobs for those who had lost everything during the financial crisis of 2008. When the crisis occurred, Wall Street “did not have the tools to break apart or wind down a failing financial firm without putting the American taxpayer and the entire financial system at risk,” and Washington did not have the power to oversee and limit the risk-taking behavior that was taking place at the time7. The act is composed of sixteen titles, each one can be considered a powerful law individually; however, the act comprised them all together to have a major impact on the economy.
Andrew Bailey (2013) “The future of UK banking - challenges ahead for promoting a stable sector”. Bank of England [online]. Available from:
Very often than not there are regulations implemented as a means to dissolve an issue that needs to be resolved as soon as possible and is implemented immediately. However these needed resolutions end up affecting the little man such as community banks.
One of the principal functions of the Federal Reserve in achieving this goal is to regulate and supervise various financial entities. It performs this function, in part, through microprudential regulation and supervision of banks; holding companies and their affiliates; and other entities, including nonbank financial companies that the Financial Stability Oversight Council (FSOC) has determined should be supervised by the Board and subject to prudential standards. In addition, the Federal Reserve engages in “macroprudential” supervision and regulation that looks beyond the safety and soundness of individual institutions to promote the stability of the financial system as a
The regulatory reform process is currently moving from policymaking to the implementation phase. The implications of regulatory reform for banks has never been greater, and the ability to navigate the new environment will require strong processes that integrate regulatory compliance and changes to the business model. Planning has never been more important as reaction to each regulation could be very costly.
The above study is quite relative to the question at hand. It looks intensely at the Financial Services Authority (FSA) in the UK as they look to move regulation from a rules based system to a more principles based one. The study also investigates the factors they believe necessary to make the implementation of this more principle based system
The goal of financial regulation is to increase efficiency in the market, as well as enhance the market 's ability to absorb shock caused by financial instability. There are many reasons for financial instability, but it can be narrowed down to
The Performance of Bank of England and How the Outcomes Influenced by Policies and Objectives during the Financial Crisis in 2008
The regulation and supervision of the CRAs in the European Union (EU) have become an increasingly prominent realm of European financial market regulation since the aftermath of the financial crisis. The CRA regulation is to be considered the fundamental legal act on which the EU’s regulation on CRAs is built.
On 20 May this year the Amendment to the Banks Act regulations ("Regulations") in terms of section 90 of the Banks Act, 1990 ("Banks Act") were published in the government gazette and will come into effect on 1 July 2016. A number of cosmetic changes have been made to the Regulations but a few material changes will be highlighted in this alert.