The UK's Financial Services Act 2012 came into force on April 1st 2013 and implements the Government’s commitment to strengthen the financial regulatory structure in the UK.
The legislation delivers significant reform of the current regulatory system, which divides responsibility for financial stability between the Treasury, the Bank of England and the Financial Services Authority (FSA).
The Financial Services Act 2012 amends the Bank of England Act 1998, the Financial Services and Markets Act 2000 and the Banking Act 2009. The Act makes other provision about financial services and markets, and about the exercise of certain statutory functions relating to building societies, friendly societies and other mutual societies to amend section 785 of the Companies Act 2006. The Financial Services Act 2012 also enables the Director of Savings to provide services to other public bodies; and for connected purposes.
Role of the Bank of England
The new system gives the Bank of England macro-prudential responsibility for oversight of the financial system and, through a new, operationally independent subsidiary, for day-to-day prudential supervision of financial services firms managing significant balance-sheet risk. The FSA will cease to exist in its current form. A proactive new conduct of business regulator (the Financial Conduct Authority) will also be created to protect consumers, promote competition and ensure integrity in markets.
The legislation implements these reforms by:
- establishing a macro-prudential authority, the Financial Policy Committee (FPC) within the Bank of England, to monitor and respond to systemic risks;
- clarifying responsibilities between the Treasury and the Bank of England in the event of a financial crisis by giving the Chancellor of the Exchequer powers to direct the Bank of England where public funds are at risk and there is a serious threat to financial stability;
- transferring responsibility for significant prudential regulation to a focused new regulator, the Prudential Regulation Authority (PRA) established as a subsidiary of the Bank of England; and
- creating a focused new conduct of business regulator – the Financial Conduct Authority (FCA) – which will supervise all firms to ensure that business across financial services and markets is conducted in a way that advances the interests of all users and participants.
Supervision and Enforcement
- HM Treasury
- Financial Conduct Authority
- Prudential Regulation Authority