A New Approach to Financial Regulation

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Table of Contents

Statement of Purpose
Background
The Current Status
Key Considerations: Main Strengths and Weaknesses
Next Steps
Reference List

Statement of Purpose

The purpose of the report is to define the changes occurred to the financial regulation system in the UK and to inform about the reasons why the reform has been issued (HM Treasury n. d). Background problems and future recommendations will also be outlined to embrace the seriousness of the proposal.

Background

Currently, there is a low level of confidence in financial system due to the great instances of mass selling of inappropriate financial products to consumers, including mortgage endowment policies, split capital investments, and personal pensions, and payment protection insurance (The Financial Services Authority 2011, p. 7).

As a result, an enormous number of clients have suffered significantly, along with the industry that has had to compensate payments of about £ 15 billion (The Financial Services Authority 2011, p. 7). Such outcomes were considered unacceptable in other segment of the economy.

The given situation has urged the necessity to introduce a new approach to regulating a financial system in the UK. In addition, the 2007 financial crisis has also created a number of challenges for the British economy.

The Current Status

The role of financial sector in building the UK economy is essential because a wide range of financial institutions shape a regulator infrastructure sustaining acceptable level of employment, funding, and risk management (HM Treasury 2011, p. 7).

In this respect, the Government acknowledges the necessity to take immediate measures to sustain financial performance of firms and banks, as well as efficient risk management under sever economic circumstances. Reforming UK financial regulation is a key priority to be introduced to replace the existing flawed system.

Key Considerations: Main Strengths and Weaknesses

Restructure of a financial regulation in the UK has touched upon the Bank of England, has introduced the Financial Policy Committee and Financial Conduct Authority, and has set out different bodies that are responsible for transparency and coordination issues (HM Treasury 2011).

At this point, the reform seeks to extend the authority of the Bank of England for sustaining financial stability and regulating settlement systems. The Financial Policy Committee has been introduced to take responsibility for financial and macro-economic issues to minimize the financial risks.

The Financial Conduct Authority aims to enhance and protect the UK financial system and to facilitate choice for financial services in the marketing sphere. Finally, much importance is attained to the concepts of transparency and coordination within the UK financial system.

New regulations will create improved mechanisms of coordination to ensure that financial processes are operated efficiently. Lack of emphasis on the correlation between financial and economic spheres is among the main weaknesses of the introduced documents.

At this point, there is no harmony between senior authorizes and general institutions, which prevents system from operating effectively (Slaughter and May 2011). Therefore, the concepts and ideas should be more consistent and systematic to face the current challenges.

Next Steps

Judging from the analysis of the key point of the document, the introduced changes highlight an important step in advancing the UK financial regulation system and presenting a new economical framework.

What is more important, the UK government continues implementing changes to overcome the pitfalls (Hoban 2012). In addition, there documents provides a radical approach for regulating institutional framework, but there is a threat of repeating experience of 1997 reform (Ferran 2011).

Reference List

Ferran, E. 2011, ‘Break-up of the Financial Services Authority’, Oxford Journal of Legal Studies, vol. 31, no. 3, pp. 455-480.

HM Treasury 2011, A New Approach to Financial Regulation: Building a Stronger System, Cm 8012. Web.

HM Treasury n.d. Reforming UK Financial Regulation, Financial Services. Web.

Hoban, M. 2012, Britain still Leads Critical Financial Reform Talks, The Telegraph. Web.

May & Slaughter 2011, Building a Strong System for Financial Regulation: Foundations Laid, Much Work Still to Do, Briefing. Web.

The Financial Services Authority 2011, The Financial Conduct Authority: Approach to Regulation. Web.

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