Research & Thoughts

FSA Dissolution Made Simple

Profound changes in UK financial services oversight

Tangled in acronym spaghetti as they may appear, there are profound and important changes taking place in the already complex world of UK financial services oversight. Jonathan Davis, a Partner with Capco, looks at some of the key developments and their possible implications for the industry

It looks like “all change” for UK financial services regulation. In a climate still very much influenced by memories of the ‘Credit Crunch,’ errant bankers and “mis-selling,’ the electorate expects the government to exercise ever-stronger control of the sector. What form will that control actually take? What will be the impact of the impending changes? We may not know all the answers already. But it will be vital to keep a watching brief on developments as they unfold, and then to relate them to likely organisational and operational impacts.

The UK’s coalition government has begun to outline its plans for the future structure of financial services regulation. Although important details are still to be announced, the Chancellor has now identified the main features of the new regime, including the dissolution of the existing Financial Services Authority (FSA).

The FSA is responsible for consumer protection, financial stability, market awareness and financial crime, and for public awareness of the financial system. It operates independently of the government, although it is accountable to parliament through the Treasury. The FSA is funded through fees levied on the firms that it regulates. The Chairman of the FSA is Lord (Adair) Turner. Its Chief Executive is Hector Sants.

Although the FSA is responsible for fighting financial crime, these responsibilities overlap with the remit of the Serious Fraud Office and, to a lesser extent, the Office of Fair Trading (OFT). The FSA thus works to tackle financial crime in conjunction with these other agencies. Among the other activities it carries out are the authorisation process for all UK regulated firms; prudential supervision of individual firms; conduct of business, including consumer protection and supervision; and the approval of candidates for key positions within regulated firms.