FSA Handbook changes

On 12 September 2012, the FSA published a consultation paper on its proposed changes to the FSA Handbook in light of the planned transition from the FSA to the “twin peaks” system of the Prudential Regulatory Authority ("PRA”) and Financial Conduct Authority ("FCA”). This consultation paper includes consideration of the following topics:

  • changes to regulatory disclosure and use of regulators’ logos;
  • changes to the skilled persons’ powers;
  • changes to the way in which a firm will apply to vary or cancel authorisations, permissions and requirements imposed by the regulators;
  • changes to the way in which a firm will apply for waivers or modifications of rules;
  • how the new regime will deal with applications regarding controllers and close links, passporting and related issues, and various types of notification; and
  • changes to guidance on the roles of the PRA and FCA in relation to transfers of insurance business.

PRA developments

The FSA has sent a letter to firms to advise them of forthcoming publications that will set out the PRA approach and key elements of the framework.

The FSA has also launched a new webpage relating to the PRA’s approach to prudential regulation for insurance firms. This indicates that the FSA will issue a document outlining the PRA’s supervisory approach for those insurance firms designated for regulation by the PRA in early October 2012. This document is intended to provide an overall view of the PRA’s supervisory authority, with the aim of providing a principal point of reference for firms in understanding how the PRA will supervise firms once it becomes the prudential regulator in 2013.

FCA developments

On 18 September 2012, Martin Wheatley, FSA Managing Director and Chief- Executive designate of the FCA, gave a speech on how conduct regulation will change under the new regime, with a focus on what is expected from the insurance industry.

The Director General of the Association of British Insurers (“ABI”), Otto Thoresen, also gave a speech relating to the FCA, focusing on the ABI’s report entitled “The Way Ahead for Conduct Regulation”. The ABI has identified six themes that it considers can form the foundation of a successful conduct regime:

  • making markets and regulation work to support the delivery of public policy goals;
  • having a regulator that is in touch with consumers;
  • having regulation that focuses on ensuring markets deliver products which meet consumer needs;
  • having regulation which enables effective competition and innovation in financial services markets;
  • having strong engagement between industry and the regulator to shape the agenda in the UK and in Europe; and
  • having a relationship between the regulator and the regulated that is built on mutual confidence and respect and involves working in partnership.

On 26 September 2012, Clive Adamson, FSA Director of Supervision, Conduct of Business Unit, gave a speech on the supervision of firms under the FCA. Key points included the following:

  • firms will be categorised according to their impact on consumers and the market, and supervisors will be allocated accordingly; and
  • the FCA supervision model will be based on three key pillars – Firm Systematic Framework, Event Driven, and Issues & Products.

FPC developments

HM Treasury has published a consultation paper on the macro-prudential tools that will be available to the Financial Policy Committee (“FPC”) to help it to ensure financial stability. The FPC is the body that will be responsible for UK macroprudential regulation under the new regulatory regime and it is designed to identify, and then take action to mitigate, risks to systemic stability. It is proposed that the FPC will have the power to make recommendations to the regulators, to the Treasury and within the Bank of England, and that it will also have the power to direct the regulators to take action in certain circumstances.