“Incoherent” and “without clear lines of accountability”. This was how George Osborne described the FSA’s so-called ‘Tripartite’ structure during the World Economic Forum (WEF) held recently in Davos. With Mr Osborne’s plans to restructure the FSA well underway, the City is well educated in the specifics of the financial regulation bill, which will lead to the formation of three new groups:
- The Financial Policy Committee (FPC) – responsible for financial regulation and monitoring the risks of the financial sector to the economy
- The Prudential Regulation Authority (PRA) – providing prudential supervision for banks, insurers and major investment firms
- The Financial Conduct Authority (FCA) – tasked with protecting consumers from sharp practices and making sure that workers in the financial services sector comply with the rules set out within the financial regulation bill
Although change is afoot, it could be argued that it’s not just the regulator that’s in need of restructuring, but the regulations themselves that need a re-think. It seems hardly a day goes past without a delay or amendment to current or proposed regulation. This has served to compound the sense of regulatory fatigue felt across the financial services industry and continues to create confusion rather than instilling confidence so vital to the economy in these uncertain times. Add to this the inadvertent consequences of recent regulation such as MiFID, which resulted in much greater opacity in the equities market rather than the greater transparency hoped for, and financial services firms could be forgiven for thinking regulation is often wide of the mark. Despite this perception of the UK’s regulatory structure, Mr Osborne’s changes will no doubt have a positive impact and bring more accountability and transparency to this integral governing body. However, once up and running, perhaps the first question that should be asked is how a similar programme of change can be applied to enhance the structure of the regulations themselves. Many might argue that this might be too tall an order given the fast-paced, ever-changing nature of the financial services industry. Moreover, Mr Osborne’s efforts to restructure the FSA can only reach so far, given that the majority of UK regulation is heavily influenced by supra-national European and global industry bodies, as well as the extraterritorial nature of US financial services laws.