Transcript Document 7263816

The Origins And
Objectives Of FSAMA
2000
Michael Taylor
Outline Of Presentation
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Background/overview of UK regulation
Factors leading up to the creation of FSA, and
Financial Services and Markets Act (FSAMA)
2000
Regulatory Reform Strategy
Objectives of FSAMA
Overview Of UK Regulation
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Historically a dual system:
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Self-regulatory/non-statutory (Banking, capital
markets, Lloyd’s insurance market, professional
associations)
Statutory (Building societies, insurance
companies, share dealers, money lenders)
Overview Of UK Regulation
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Bank of England
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Stock Exchange/Lloyd’s
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Informal control of banking system through
“moral suasion” and incentives
“club” rules
Department of Trade
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Insurance companies
S.123 banks
Overview Of UK Regulation
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Change in the 1970s and 1980s
Banking Act 1979 (and 1987)
Stock Exchange “Big Bang”
Gower Report & Financial Services Act 1986
Building Societies Act 1986
Factors Behind The 1997-2000
Reforms
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Role of the Bank of England
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Failure of “self-regulation”
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Supervision of BCCI & Barings
Monetary policy independence
Pensions mis-selling
Complexity
Market abuse
Factors Behind The 1997-2000
Reforms
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Scandinavian model of integrated regulation
The debate over ‘Twin Peaks’
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“Convergence” or “blurring of boundaries”
Regulatory efficiency
New Labour government
Factors Behind The 1997-2000
Reforms
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Industry concerns:
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London’s position as major international financial
centre
Wholesale/retail distinction
Maintain practitioner input
Complexity of regulation – duplication/overlaps
Regulatory cost
“Light regulatory touch”
Regulatory Reform
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Government announcement on May 20, 1997
Emphasised deficiencies in Financial Services
Act 1986.
Simplification. Clear allocation of
responsibilities.
Integration of financial services – blurring of
distinctions.
Regulatory Reform
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Preparations for new regulatory agency made
in advance of legislation
Planning team under Sir Andrew Large
reported in July 1997
A number of unresolved issues:
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Scope of the agency
Funding
Governance etc.
Regulatory Reform
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Securities and Investment Board changed
name by special resolution to Financial
Services Authority
SIB/FSA was body corporate – “company
limited by guarantee”
Bank of England Act 1998 transferred
banking supervision to SIB/FSA
Subsumed SROs. Other regulators followed
Regulatory Reform
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Division of responsibility with the Bank of
England
BoE still responsible for financial system
stability (not precisely defined)
BoE’s Lender of Last Resort role continued
MoU between BoE, FSA, Treasury
Joint Committee
Objectives Of FSAMA 2000
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FSAMA replaced multiple legislative acts:
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Banking Act 1987
Financial Services Act 1986
Insurance Companies Act 1982
Building Societies Act 1986
Objectives Of FSAMA 2000
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FSAMA created only statutory outline,
leaving detailed to be filled in by secondary
legislation
Conferred powers on FSA
Defined FSA’s objectives and accountability
Created authorization regime
Created new offence of market abuse
Objectives Of FSAMA 2000
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FSAMA also created
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Integrated Ombudsman scheme
Financial Services Compensation Scheme
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NB: No deposit insurance agency in UK
Financial Services and Markets Tribunal