We have reported previously on proposals for reform of the UK's financial services regulatory structure (click here to see our most recent post, and here for a detailed introduction to the proposals in the December 2010 edition of our Insurance and Reinsurance Review). The UK Treasury has now issued a further consultation paper (dated February 2011) discussing its proposals in greater detail.
The paper sets out the UK Government's proposals for each of the three principal bodies involved in its "twin peaks" regulatory structure: the Financial Policy Committee of the Bank of England (FPC), the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) (which was previously referred to as the Consumer Protection and Markets Authority).
The paper also confirms a previous assumption that insurers will be subject to regulation by both the PRA and the FCA, while insurance intermediaries will be subject to regulation by the FCA only.
The paper focuses in some detail on the need for interaction between the PRA and the FCA and proposes a statutory requirement for the PRA and FCA to enter into a memorandum of understanding between themselves.
Further publications are expected in Spring 2011, including FSA and Bank of England publications on the transition of prudential regulation from the FSA to the PRA and the PRA's supervisory approach, as well as on the FCA's proposed operating model.
The consultation closes on 14 April 2011. The Government intends to publish draft legislation in Spring 2011 with a view to introducing a Bill formally to Parliament in mid 2011 and completing the legislative process by mid 2012.