The Financial Services Authority (FSA) has been replaced by two new regulatory bodies, which will aim to monitor financial institutions and better protect consumers.
The launch of the ‘twin peaks’ regulatory structure marks what Chancellor George Osborne called a ‘resetting’ of the financial system following the banking collapses and miss-selling scandals that have blighted the financial industry in recent years.
The Prudential Regulation Authority (PRA) – an arm of the Bank of England – is now responsible for the prudential regulation and supervision of:
- building societies
- credit unions
- major investment firms.
It will regulate around 1,700 firms, promoting the protection of firms, the UK financial system and policy holders.
The PRA will work alongside the independent Financial Conduct Authority (FCA), which will supervise the conduct of these firms. The FCA will also be responsible for the prudential regulation of brokers, asset managers and independent financial advisers.
Martin Wheatley, chief executive of the FCA and the man who led the review into the Libor scandal, told BBC Radio Four that financial institutions had a ‘responsibility’ to consumers.
Launching the new regulatory bodies, George Osborne said: “The changes coming into effect today are the start of resetting the system of financial regulation in our country.”
“They represent a fundamental change in how financial services will be regulated in the future. They do away with the discredited system that failed to sound the alarm as the financial system went wrong, and put in its place a new system that puts the Bank of England back in charge.”