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Module 5 - Reponsibilites and approach to regulation (Prudential…
Module 5 - Reponsibilites and approach to regulation
Prudential Regulation Authority (PRA)
Part of BOE
Authorise larger firms and banks, building socs, credit unions, insures
Primary objctive
is to focus on safety and soundness and the damage these firms could do to stability of UK financial system
Secondary
is to facilitate competition
Uses regulation and supervision to achieve it's goals
3 chareteristics of it's approach are
Judgement based
Forward Looking - asseses future risks
Focused - targets firms and issues posing greatest risk
Supervised by PRC
Board consists of goverenor of BOE, deputy gov of financial stability, ceo of PRA
PRC accountable to parliament
PRA involved in both EU and global decisions with regard to supervision, financila stability and protection
PRA overseas firms operating in UK and overeseas firms whose operatoions are in the UK
Works with overseas counterpart where necessary
PRA involved in European system of financial supervision ESFS
Also representative on EBA and EIOPA
Financial Policy Comittee (FPC)
Part of BOE
Responsible for macro supervision, must identify systemic risk arising in the finance system. Uses 3 tools to do this
Make sure banks put aside extra reserves
Make sure higer risk assets holds more reserves
Can limit borrowing
Has to limit its policies if impacting growth
Governance
Chaired by BOE
Accountability
Treasury provider FPC with guidance
FPC has to respnd to treasury guidance and agree what action they will take, can reject recommendations
Publishes a stability report twice a year
Fincancial Conduct Authority (FCA)
3 main objectives
Protect consumers
intervene in markets before consumers suffer
Promote financial markets
Also protecting financial markets to make sure the system is not being abused
Promote competition
Help promote by making sure customers can make informed decisions
FCA works with the competion powers - competion act 1998 and Consumers Rights Act 2015
FCA must follow 8 regulatory principals
Must provide value for money
Cost on firms must be proportionate to benefits
Has to ensure stable growth
Has to create a environment where consumers can be responsible for the informed decisions they make
make sure that the senior managers know what they are responsible for
Create clear distinctions for what each role is responsible for
make info available to help discipline and educate the public
make sure all decisions are open and transparent
FCA scope and powers
Enforcement
Supervision
Authorisation
FCA accountability
Reports to the treasury
Makes annual report to the treasury
Enforcement
Can withdraw authorisation
Take documents
Work with law enforcement agencies
Supervision
3 pillar system
1 Proactive
2 Event driven
3 Thematic approach
Has to deliver fair and balanced supervision
Complaince monitoring
Re-active - responding to concerns that get raised
Pro-acive - via inspection visits and reports such as RMAR
Firms must have own compliance individual to monitor processes