HM Treasury has published a summary of responses to its consultation on the reform of the UK financial services regulatory regime. The paper confirms the Government's decisions that the UK Listing Authority will remain within the Consumer Protection and Markets Authority's (CPMA) markets division and that the FSA's criminal enforcement powers in relation to market conduct will be retained within the CPMA. The responses paper also sets out the Government's emerging thinking on a number of other key issues highlighted by respondents.


In June, the Government announced proposals to abolish the FSA and reform the UK financial services regulatory regime. It proposes the abolition of the present tripartite financial regulatory system, with the FSA ceasing to exist in its current form, and the Bank of England taking back responsibility for prudential regulation. HM Treasury published a formal consultation paper with further details of the proposed new regulatory structure in July. The consultation closed in October and the Government has now published a summary of responses to the consultation. Please see our briefings to date on the reforms: 26 July, 6 October and 15 October.

UKLA update

In the consultation paper, the Government sought views on whether the functions of the UK Listing Authority (UKLA) should be merged with other regulatory functions relating to companies and company reporting, notably those of the Financial Reporting Council (FRC).

An overwhelming majority of respondents believed that the UKLA should remain within the CPMA, rather than being merged with the FRC. The reasons cited by respondents include:

  • the need for effective representation of UKLA in the European Securities and Markets Authority (ESMA);
  • clear links between primary and secondary market regulation; and
  • differences in operational culture between the UKLA (a ‘real-time’ regulator dealing with market activity as it occurs) and the FRC (which focuses on regulating the framework for accounting reporting).

The Government has therefore decided that the UKLA will remain a part of the successor to the FSA's market division, that is, it will be within the CPMA.

Market abuse enforcement

The Government was also considering whether the FSA’s criminal enforcement powers in relation to market conduct should be transferred to the new Economic Crime Agency. The summary of responses states that the Government has decided that these powers should be retained by the CPMA, to ensure that the CPMA can take a strong approach to both regulating and prosecuting market abuse.

Other points of interest

The responses paper also sets out the Government's emerging thinking on a number of other key issues highlighted by respondents, including the following:

Accountability and transparency

  • The Financial Policy Committee (FPC) will have the same transparency and accountability mechanisms as those applied to the Monetary Policy Committee within the Bank of England.
  • The Government is committed to getting Prudential Regulation Authority (PRA) accountability right and will develop mechanisms to ensure that PRA will be held fully accountable by Parliament and the public.
  • The Government is considering options for using greater transparency and disclosure as a regulatory tool e.g. enabling publication of relevant and appropriate supervisory information to increase incentives for firms to adopt a best-practice approach to regulatory compliance.

Statutory objectives

  • A key element of the new regulatory framework will be to ensure that the new regulatory authorities each have a single statutory objective.
  • The Government recognises the importance of many of the secondary factors cited by respondents as those to which the PRA and the CPMA should have regard. The Government's preferred approach will be set out in draft legislation in the next consultation.
  • The Government will develop the CPMA's powers to enable it to be a strong consumer champion in a way which does not compromise the independence of the CPMA.

Coordination of the new regulatory framework

  • The Government recognises the importance of ensuring that there is effective cooperation between the regulatory authorities, in particular between the PRA and CPMA, welcoming the solutions put forward in response to the consultation.
  • The Government expects the PRA and CPMA to ensure appropriate coordination, both through the legislative requirements placed upon them and through a range of non-statutory protocols and arrangements. The PRA and CPMA will also operate under the usual obligation placed on public bodies to behave reasonably and in the public interest.
  • A period of 'shadow running' a 'twin peaks' structure within the FSA prior to the establishment of the new authorities will provide an opportunity to develop understanding of the practical working arrangements that will be required for the CPMA and PRA to work together effectively.
  • The Government will seek to ensure that the PRA and CPMA have equal status, with the use of the PRA's veto only where necessary to protect financial stability.
  • The Government has noted respondents' suggestion that a Chief Executive-designate of the CPMA be installed as soon as possible. The necessary recruitment process is underway with the intention that the successful candidate will be on the FSA Board in time for the move to shadow running within the FSA next year.

European and international reform

  • The Government is committed to ensuring that there is continued, focused engagement by HM Treasury, the FSA and the Bank of England with European and international developments and that the UK's voice on negotiations remains strong.
  • Continuity will be provided during the transitional period by ensuring there is no change to the UK's institutional representation in international forums until the legislation to create this new structure is enacted.
  • The Government agrees with respondents that the new regulatory authorities should engage effectively with the new European Supervisory Authorities (ESAs). The PRA will represent the UK in the new ESAs for banking and insurance, whilst the CPMA markets division will represent the UK in the ESMA.

Next steps


  • December - HM Treasury and BIS to publish a joint consultation on consumer credit regulation
  • By end of 2010 - interim FPC to be established within Bank of England


  • February - HM Treasury to publish consultation on detailed proposals and draft legislation
  • Spring - FSA to move to shadow internal structure, chief-executive-designate of the CPMA to be in place; ICB to publish detailed analysis of leading reform options
  • June - draft legislation reforming UK financial services regulatory architecture to be introduced
  • End of September - ICB to make final recommendations


  • Summer - Primary legislation implementing new regulatory structure to be enacted, with secondary legislation and administrative measures to be enacted thereafter
  • End of 2012 - New regulatory bodies to be up and running