The UK’s financial regulatory landscape is made up of a number of bodies, each with their own responsibilities and objectives.
The bodies work together to maintain integrity in the UK’s financial systems, securing both monetary and financial stability.
Financial Conduct Authority
The Financial Conduct Authority is an independent body that regulates over 58,000 financial services firms and financial markets in the UK, while acting as the prudential regulator for over 18,000 of those firms.
The primary objective of the FCA is to ensure that regulated markets function well, providing an appropriate degree of protection to customers. The organisation also serves to protect the financial markets in the UK, promoting effective competition to the benefit of consumers.
Funded entirely through the firms it regulates, the FCA is accountable to the Treasury. Regular engagement with European and international authorities is also common, to enhance cooperation and discuss common interests.
Bank of England
Established in 1694, the Bank of England is the central bank in the UK. The bank settles around £500 billion worth of payments between banks each day, representing a third of the UK’s annual gross domestic product.
Interbank transfers for several retail and card systems are also settled by the bank, offering a safe means for banks to transfer money to each other. The bank also sets the official interest rates for the UK, directly influencing the cost of savings, loans and mortgage rates.
The bank is responsible for the oversight of clearing, settlement and payment systems. To support financial stability, the bank oversees three main types of financial market infrastructure: recognised payment systems, central securities depositories and central counterparties (CCPs).
A memorandum of understanding on supervising such infrastructures was signed with the FCA, with the standards for supervision framed by the international CPSS/IOSCO principles.
Financial Policy Committee
The Financial Policy Committee was established in 2013 by the Bank of England as part of the new system of regulation to improve financial stability following the financial crisis.
The purpose of the FPC is to identify, monitor and take action to remove or reduce systemic risks with a view of protecting and enhancing the resilience of the financial system in the UK.
The FPC has the power to direct regulators to take action on a number of specific policy tools, and can make recommendations to anyone to reduce the risk to financial stability.
Prudential Regulation Authority
The Prudential Regulation Authority is responsible for the authorisation, in conjunction with the FCA, and prudential supervision of individual deposit takers, insurers and certain designated investment firms.
The PRA regulates and supervises around 1,500 banks, building societies, credit unions, insurers and major investment firms. The organisation has three key objectives:
- Promote the safety and soundness of the firms it regulates
- Contribute to securing an appropriate degree of protection for insurance policyholders.
- Facilitate effective competition between firms
Through regulation, the PRA outlines standards and policies for which firms should adhere to, while supervision ensures firms are meeting those expectations.
Her Majesty’s Treasury is the government’s economic and finance ministry, maintaining control over public spending, setting the director of the UK’s economic policy in the pursuit of strong and sustainable economic growth.
The Treasury has responsibilities in financial services policy, including banking and financial services regulation, stability and ensuring competitiveness in the City.
The primary objectives of the Treasury are:
- Place the public finances on a sustainable footing
- Ensure the stability of the macro-economic environment and financial system, supporting sustainable and balanced growth
- Increase employment and productivity, ensuring a competiveness across all regions of the UK.