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The Origins And Objectives Of FSAMA 2000

The Origins And Objectives Of FSAMA 2000. Michael Taylor. Outline Of Presentation. 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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The Origins And Objectives Of FSAMA 2000

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  1. The Origins And Objectives Of FSAMA 2000 Michael Taylor

  2. Outline Of Presentation • 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

  3. Overview Of UK Regulation • Historically a dual system: • Self-regulatory/non-statutory (Banking, capital markets, Lloyd’s insurance market, professional associations) • Statutory (Building societies, insurance companies, share dealers, money lenders)

  4. Overview Of UK Regulation • Bank of England • Informal control of banking system through “moral suasion” and incentives • Stock Exchange/Lloyd’s • “club” rules • Department of Trade • Insurance companies • S.123 banks

  5. Overview Of UK Regulation • 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

  6. Factors Behind The 1997-2000 Reforms • Role of the Bank of England • Supervision of BCCI & Barings • Monetary policy independence • Failure of “self-regulation” • Pensions mis-selling • Complexity • Market abuse

  7. Factors Behind The 1997-2000 Reforms • Scandinavian model of integrated regulation • The debate over ‘Twin Peaks’ • “Convergence” or “blurring of boundaries” • Regulatory efficiency • New Labour government

  8. Factors Behind The 1997-2000 Reforms • Industry concerns: • London’s position as major international financial centre • Wholesale/retail distinction • Maintain practitioner input • Complexity of regulation – duplication/overlaps • Regulatory cost • “Light regulatory touch”

  9. Regulatory Reform • 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.

  10. Regulatory Reform • 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: • Scope of the agency • Funding • Governance etc.

  11. Regulatory Reform • 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

  12. Regulatory Reform • 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

  13. Objectives Of FSAMA 2000 • FSAMA replaced multiple legislative acts: • Banking Act 1987 • Financial Services Act 1986 • Insurance Companies Act 1982 • Building Societies Act 1986

  14. Objectives Of FSAMA 2000 • 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

  15. Objectives Of FSAMA 2000 • FSAMA also created • Integrated Ombudsman scheme • Financial Services Compensation Scheme • NB: No deposit insurance agency in UK • Financial Services and Markets Tribunal

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