Overview

This bill makes significant changes to the regulation of financial services in the UK, primarily focusing on strengthening the oversight of the Bank of England and clarifying the roles of the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA). It also introduces new offenses relating to misleading statements and practices in financial markets.

Description

The bill amends the Financial Services Act 2000 and the Banking Act 2009. Key changes include:

Bank of England Oversight

Establishes an Oversight Committee within the Bank of England, composed of non-executive directors, to review the Bank's performance, financial controls, and the activities of its Monetary Policy and Financial Policy Committees. This committee will also have responsibilities relating to remuneration of key Bank personnel. The committee's reports will be given to the Treasury and, generally, published unless deemed against the public interest.

Financial Policy Committee (FPC)

The FPC's responsibilities are clarified, emphasizing its role in contributing to the Financial Stability Objective and supporting government economic policy. The Treasury will specify relevant economic policy matters for the FPC. The FPC is required to prepare explanations for significant decisions and to conduct periodic reviews of its directions and recommendations.

Prudential Regulation Authority (PRA)

The PRA is required to establish a strategy in relation to its objectives and publish it. The bill also creates a PRA Practitioner Panel to represent the interests of practitioners. The PRA's power is expanded in relation to with-profits policies. The PRA's general objectives and functions are amended to include consideration of the impact on competition.

Other Amendments

The bill amends provisions relating to appointed representatives, clarifies the FCA’s power to make rules, and introduces new offenses concerning misleading statements and impressions in relation to financial services and benchmarks. Furthermore, it grants new powers to the Bank of England in relation to UK clearing houses, including directing their actions and participating in insolvency proceedings. The bill also alters how the FCA, PRA, and Bank of England handle penalties, requiring them to remit funds to the Treasury after deducting enforcement costs.

The bill also includes provisions for amending the Consumer Credit Act 1974 to clarify the suspension of licenses and introduces changes to the Banking Act 2009, particularly in relation to the handling of banking groups and investment firms under the special resolution regime.

Government Spending

The bill's impact on government spending is indirect. Increased regulatory oversight might lead to higher enforcement costs for the regulators in the short term. However, the long-term effect aims to enhance financial stability and minimize the costs of future financial crises. The bill requires the FCA, PRA and Bank of England to remit penalty receipts to the Treasury after accounting for enforcement costs.

Groups Affected

• Bank of England: Increased accountability and oversight through the new Oversight Committee.
• Financial Policy Committee (FPC): Clarified responsibilities and enhanced transparency requirements.
• Prudential Regulation Authority (PRA): New strategic planning and reporting requirements; increased powers relating to with-profits policies.
• Financial Conduct Authority (FCA): New rules and responsibilities, including those relating to credit-related activities and benchmarks.
• Financial institutions: Subject to increased scrutiny and potential new regulations, especially regarding benchmarks and reporting.
• Consumers: Increased protection through strengthened regulation and new offenses related to misleading statements.
• UK Clearing Houses: Subject to new regulatory powers of the Bank of England, including direction and involvement in insolvency proceedings.
• Treasury: Receives penalty receipts from financial regulators after deduction of enforcement costs.

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