The reforms will also introduce greater judgement and focus to regulation of financial firms. The existing regulatory body, the Financial Services Authority (FSA), has been perceived by the Government to be a failing institution, and will cease to exist in its current form. The 2012 Act creates two new focused financial regulators:
• A new Prudential Regulation Authority (PRA) will be responsible for the day-to-day supervision of financial institutions that manage significant risk on their balance sheet. It will adopt a more judgement-focused approach to regulation so that business models can be challenged, risks identified and action taken to preserve financial stability.
• An independent conduct of business regulator, the Financial Conduct Authority (FCA), will take a tough approach to regulating how firms conduct their business. It will have a strong mandate for promoting confidence and transparency in financial services and to give greater protection for consumers of financial services. It will also have a strong role in promoting competition.
These two regulators are expected to replace the Financial Services Authority (FSA) from 1 April 2013. The Bank of England will oversee the work of the PRA and FCA, with a new Financial Policy Committee (FPC) within the bank, which will look at the wider economic and financial risks to the stability of the system. Already, before 1 April, an interim FPC has been established by the Treasury and the Bank, to undertake as far as possible before the formal legal powers are created, the FPC’s role of identifying and monitoring risks to the financial system as a whole.
