A View From the Top

As was highlighted in my previous post there is a need for a subsidiary within the Bank of England to prevent against possible conflicts with the monetary policy committee. This subsidiary will take the form of the Financial Policy committee. According to Mr. Sants “unencumbered by the FSA’s old “light-touch” approach, these watchdogs are ready for the tough, “proactive” and “judgment-led” philosophy that the coalition government is trying to foster”.  This new structure is illustrated by the diagram below (source, HM A new approach to financial regulation); 

As you can see from this diagram at the top is the FPC and from this organisation there is going to be two new financial regulators, the PRA and the FCA. Beginning with the prudential regulation authority (PRA), they will be in charge of regulating, insurers. According to the report “PRA supervisors will focus on developing a clear understanding of the financial soundness of firms and risks to their business models.” 

Then the second organisation will be The Financial conduct authority (FCA) and they will be in charge of the “good conduct” of business as the government sees this as an “essential element of a strong and efficient financial system”. At the head of these two organisations will be the financial policy committee whose overall objective will be to “protect and enhance financial stability” and it will hopefully achieve this objective through the use of the PRA and the FCA. The main functions of the FPC will be to “monitor the stability and resilience of the UK financial system with a view to identifying and assessing systemic risks and; use the levers and tools at its disposal to address those risks.” (A new approach to financial regulation 2010).

So it is clear with this new structure and the new objectives of these organisations that the Government have learnt from the lessons of the past as highlighted by my first post “The FSA; where it all went wrong”.  I feel it is appropriate to finish off with the words from the great Winston Churchill “all men make mistakes but only wise men learn from their mistakes”