Financial services policy agenda
The Government is clear that decisive action is needed to effectively reform financial services. A responsibly managed and well-regulated financial services sector is essential to the success of the British economy.
The Chancellor outlined the financial services policy agenda in his June 2010 Budget and Mansion House speeches. This includes:
- Abolishing the Financial Services Authority (FSA) and transferring its prudential supervisory powers to the Bank of England. View the Government’s July 2010 consultation document on regulatory reform, along with the summary of responses.
- Creating a Financial Policy Committee (FPC) in the Bank of England with a dedicated focus on macro-prudential analysis, to ensure that risks developing across the financial system are identified and responded to.
- Creating a new Prudential Regulation Authority (PRA) responsible for the day-to-day supervision of financial institutions that are subject to significant prudential regulation.
- Establishing a powerful new consumer protection and markets authority (CPMA) with responsibility for regulating the conduct of all financial services firms.
- Creating a new Economic Crime Agency – bringing together the work of various Government agencies into a single powerful force to tackle crime.
- Setting up an Independent Commission on Banking, chaired by Sir John Vickers, to investigate the structure and competition of UK banks.
- Helping small and medium sized businesses (SMEs) having difficulty accessing finance.
- Introducing a bank levy so that banks make a fair contribution in respect of the potential risk they pose – a joint statement announced similar levies in France and Germany.
In addition, in the Spending Review (November 2010), the Chancellor underlined the Government’s commitment to ensuring that the banking sector has in place strong governance around taxation. The Chancellor made clear that he expected the banking sector to comply with the Code of Practice on Taxation by the end of November 2010. All 15 of the major UK banks have since signed up.
The Code encourages banks to adopt ‘best practice’ in relation to their tax affairs, and takes a preventative approach to tax avoidance. While recognising that banks should undertake appropriate tax planning to support their business needs, the Code makes clear that the outcome of tax planning should not run contrary to the intentions of Parliament.
The Chancellor announced the details of Project Merlin in February 2011. The UK’s top banks have committed to:
- Lend more to businesses (especially SMEs) this year than last: £190 billion of new credit, up from £179 billion in 2010.
- The pay of each bank’s CEO and senior managers will be linked to performance against the SME lending commitments.
- Pay out lower bonuses than last year.
- World-leading disclosure arrangements, with the pay of senior executive officers being published annually, making them more accountable to their stakeholders;
- Make a £1.2 billion contribution to the Business Growth Fund and the Big Society Bank.
The Government also continues to engage and influence strongly at an international level with EU and G20 counterparts – representing the interests of the UK to shape future financial services regulation and provide the foundation for a healthy and sustainable macroeconomy. The Government is committed to playing a full part in the global reform effort, while proceeding as quickly as possible with establishing a new regulatory framework in the UK.
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