Welcome to the first in our Financial Services Series, monthly bulletins for the regulated financial services sector dealing with important aspects of regulation. The primary focus of the bulletins will be enforcement (and how to avoid it!). However, we will also cover important aspects of the wider relationship between the Financial Conduct Authority (FCA) and regulated firms. Over the course of the next 12 months, the intention is to provide practical tips for the smooth management of the regulated firm’s relationship with the FCA.
In this month’s bulletin, we:
- look at some of the issues with dual regulation by the FCA and Prudential Regulation Authority (PRA); and
- comment on the change in focus at the FCA together with early indications of how the new approach is affecting firms.
Dual regulation in practice
Many firms are solely regulated by the FCA but those that are dual-regulated such as banks and insurance companies now have the burden of dealing with two regulators. The operational objectives of the regulators differ. The FCA has three operational objectives: securing an appropriate degree of protection for consumers (including wholesale consumers); protecting and enhancing the integrity of the UK financial system; and promoting effective competition in the interests of consumers in the markets for financial services.
The PRA has as its objective the promotion of the safety and soundness of those firms which became subject to regulation by both the FCA (for conduct of business) and the PRA (for prudential regulation) principally by minimising any adverse effects of firm failure on the UK financial system and ensuring that firms carry on their business in a way that avoids such adverse effects.
Dual-regulated firms have naturally been concerned that there might be adverse consequences such as conflicting communications, delays and duplication caused by the need to deal with two regulators rather than one, leading to an increase in the cost of regulation.
