Will the proposed changes to financial regulation work, ask Lista M Cannon & Paul Adams
Since the start of the financial crisis in 2007, the “tripartite” model of financial regulation, which saw responsibility for financial regulation shared between HM Treasury, the Bank of England and the Financial Services Authority (FSA), has been widely criticised for its inability to prevent, and effectively deal with, the financial crisis. Under the tripartite model, the FSA has responsibility for:
- the direct supervision of all regulated firms for both prudential and conduct of business purposes; and
- taking enforcement action against firms where it identifies regulatory failures.
The FSA’s “light touch” approach to regulation was widely criticised as inadequate and the decision was taken that its operating model needed to change.
On 27 January 2012, the government published the Financial Services Bill (the Bill). The Bill will introduce a new model of firm-specific regulation which will see the separation of “micro-prudential” regulation (or the regulation of individual firms’ financial stability through the monitoring and assessment of the risks they take on their balance sheets) and conduct regulation
