The British government has replaced the Financial Services Authority (FSA) with two separate regulatory authorities in an effort to make the country’s financial system stronger and forward-looking.
Under the new twin peaks system, the ‘failed’ financial watchdog will now become The Financial Conduct Authority (FCA), an independent agency led by Martin Wheatley, and the Prudential Regulation Authority (PRA), an arm of the Bank of England headed by Andrew Bailey.
The PRA will oversee 1,700 banks, insurers and large investment firms, while the FCA will be responsible for protecting investors, policing the markets and promoting competition.
Bailey and Wheatley will also become the member of the Financial Policy Committee.
Bailey has promised that his staff will focus on a couple of big issues at each firm, while Wheatley has promised a fresh approach, seeking good outcomes for customers and businesses rather than stacks of carefully completed forms.
Regulators have “a very big question for the biggest firms”, Bailey said. “Can you control your firm . . . to a level and degree that society now expects from you? It is a huge challenge for them, now, to prove that it can be done.”
Wheatley said: “I characterise it as a move away from looking in the rear-view mirror. The conversations will be much more geared towards . . . tell us about your growth plans; where do you see your business moving to over the next six months [and] where do you see the risks in those areas?”
Jon Pain, a former regulator now with KPMG, told the Financial Times: “The real question is whether the growth agenda creeps into their remit. There is a trade-off. How hard and how fast do you push to make banks safe?”
Nathan Willmott, a partner at Berwin Leighton Paisner, told the FT: “Dealing with separate supervisory teams at the PRA and FCA, with their differing objectives and approaches, will undoubtedly add to the already massive regulatory burden.”