Regulatory Outreach for Student Education

Engaging Students in the Debate Over Financial Services Reform

Today’s debate over regulatory reform is a watershed activity in the careers of financial industry professionals. Years ago, similar debates over mandated pre-funding of pension liabilities (ERISA) and the reunification of investment banking with commercial banking (Glass Steagall's repeal) changed the direction of financial market evolution. Opinions may differ on the merits of those changes, but no one disputes their significance.

Without question, college students and young professionals should be well-versed in the issues involved in today's debate. The Regulatory Outreach for Student Education (ROSE) program is the Center's way to give top students, tomorrow's business and finance leaders, opportunities to experience the financial regulatory process up-close.  The ROSE program is designed to put students in touch with the regulators, policy-makers, and industry leaders who are currently shaping the financial regulatory landscape.  We then challenge them to research and articulate their own positions on the most intriguing and interesting issues.  

ROSE Program Blog

Wednesday, November 9, 2011

Proposed UK Financial Services Bill Would Radically Change UK Regulatory Structure


Author: David Schwartz J.D. CPA David Schwartz J.D. CPA

The Chancellor of the Exchequer has proposed a radical reformulation of financial services regulation in the UK unifying for the first time macro-prudential regulation, day-to-day oversight, and conduct of business regulation of all financial services firms. Under the UK's current tripartite system, HM Treasury, the Bank of England, and the Financial Services Authority (FSA) share responsibilities.  All three entities have come under fire for failing to anticipate the financial crisis, and the tripartite system has been blamed on many fronts for failing to deal with the crisis in a timely and effective manner.  This legislation seeks to address some of the division and miscoordination alleged to have occurred amongst the tripartite entities. The proposed three new structure would do away with the FSA, and unify regulation and supervision under new structures housed in the Bank of England.
  1. The Financial Policy Committee (FCP) will be responsible for identifying and acting to reduce systemic risks, and working to protect the UK financial system. The FCP will not directly supervise any financial firms.
  2. The Prudential Regulatory Authority (PRA) will be responsible for micro-prudential regulation of banks, building societies, insurers, and certain investment firms considered to be of systemic importance.
  3. The Financial Conduct Authority (FCA) will inherit most of the duties of the FSA, overseeing the manner in which individual financial firms conduct their business. 
Moving all financial oversight and prudential regulation under into the Bank of England may have the effect of giving EU oversight entities, the European Systemic Risk Council (ESRC) and the European System of Financial Supervisors (ESFS), greater influence in UK financial affairs.  As the UK works to conform its financial reforms to the principles set forth by these EU entities, a unified UK regulatory structure will streamline cooperation between the Bank of England and the ESRC and ESFS, allowing EU principles to be implemented more quickly and effectively. 
 
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