On July 8, the UK Chancellor of the Exchequer, Alistair Darling, presented to Parliament a White Paper entitled “Reforming Financial Markets.” The White Paper sets out the UK Government’s proposals for further reforms necessary to strengthen the financial system and its regulation as well as the Government’s analysis of the causes of the current financial crisis and the actions already taken to restore financial stability.
The White Paper sets out a number of core issues to which the Government's strategy for regulatory reform must respond:
- strengthening the UK’s regulatory institutional framework, so that it is better equipped to deal with all firms and, in particular, globally interconnected markets and firms;
- dealing with high impact firms that may be seen as being “too big to fail”, through improved market discipline and improved supervisory focus on such firms;
- identifying and managing systemic risk as it arises across different financial markets and over time; and
- working closely with international partners to deliver the global action required to respond to the lessons of the financial crisis.
The Government proposes to increase the UK Financial Services Authority’s (FSA’s) powers by adding a statutory objective of financial stability and extending its rule-making powers. The Government also proposes to extend the FSA's powers to deal with individual firms on a case-by-case basis through firm-specific interventions and to enhance its enforcement powers in relation to market misconduct. In addition, the FSA will be empowered to constantly review the scope of regulation, gathering information from unregulated entities to determine whether they pose a threat to stability and should be brought within the FSA’s regulatory regime.
The Government intends to strengthen the structure of the regulatory system by increasing the powers of both the FSA and the Bank of England and creating a Council for Financial Stability.
In order to ensure a competitive and fair market for consumers, the Government proposes a range of consumer protection measures. These include measures to raise financial capability; improve access to simple, transparent products; develop better and faster ways of dealing with widespread complaints; improve depositor protection arrangements; and strengthen competition and choice.
In a separate announcement, the FSA welcomed the Government’s intention to legislate to give the FSA a statutory objective with respect to financial stability as well as new powers to act in pursuit of this objective.