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The regulation of the UK financial services, in broad terms is broken up into a five tear process. We will look at each tear now in more detail
First level this will consist of European legislation that will directly impact on the United Kingdom financial industries. The two main types of European regulation are regulations these are binding to each member state and will have to implemented in a specific time frame by each member state and the other is a directive, each member usually has to implement the directive in a time scale that is not specified and it is up to the member state how the interperate the directive.
Second Level the Acts of parliament will set out what can and cannot be done (this is typically macro management of the UK regulation). Whenever reference is made to the acts of parliament, it should be borne in mind that that the effects of that states laws are often achieved through subsidiary legislation, this is referred to as statutory instruments, which will be made pursuant to the ACT. Examples of legislation that directly effect the financial industry are the Financial Services & Markets Act 2000, and the Banking Act 1987 and the building societies ACT 1997
Third level - this act allows for regulatory bodies suck as the Financial services authority FSA to monitor the regulations and issue rules and guidance on how the requirements of the rules and guidance are to be met by financial firms. The main regulatory body in the United Kingdom is the Financial Services Authority (FSA), which has taken over the regulatory responsibilities of a number of other bodies, including, The bank of England which previously regulated the banking sector, and the building societies commission
Fourth level this refers to the policies and practices of the financial institutions themselves, and the internal departments that ensure they operate legally and competently an example would be compliance for a life assurance department
Fifth level this is for arbitration schemes to which the consumers complaints can be refereed if they are not happy with the final response of the firm they have been dealing with and they have felt they have had to complain about. For the majority of cases, the UK consumer of financial products and services will have to complain to the financial ombudsman FOS if they are not happy with the final outcome of the firm they have complained about.
Going forward in the United Kingdom these regulation are pre-credit crunch and were introduced under a labour government (tony Blair). We are now at a post credit crunch phase in the United Kingdoms life cycle and we have a new government which is led by a Mr David Cameron (who is a conservative). This party has decided that the old systems failed and they have decided to put the power of regulation financial firms and institutions back with the bank of England. They have also decided that they will get rid of the FSA and replace it with the Financial Markets Consumer Protection (this will be responsible for the micro management of all financial firms and institutions, these changes should be implemented by 2013. Finally we hope you have enjoyed the content of this article and could you please visit us at KPM Financial Services where there is a lot more information relation to the UK financial services sector
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