1 HM Treasury, ‘2010 to 2015 Government Policy: Financial Services Regulation’, policy paper (updated 8 May 2015). The ‘Issue’ underlying the 2010–2015 Conservative and Liberal Democrat coalition government policy on post-financial crisis regulatory reform and the mandate for the Financial Services Act 2012.
3 Foreword to HM Treasury, ‘Review of HM Treasury’s management response to the financial crisis’ (March 2012). Indeed, it was acknowledged by HM Treasury that ‘… the financial sector had not been a high profile area of the Treasury’s business for a number of years [and that] there was a small Treasury team working on financial stability in the immediate run-up to the crisis. The Bank had cut back its staffing on financial stability and the FSA was increasingly focused on consumer and competition issues.’
4 Financial Services Authority, ‘The Turner Review: A Regulatory Response to the Global Banking Crisis’ (March 2009). See Ch 8, Section E for a more in-depth discussion of the Turner Review.
5 The Guardian reporting (‘Turner Review: experts’ views’, on 18 March 2009) the views of, for example: John Cridland, now the Director-General of the Confederation of British Industry, who remarked that ‘Turner has come up with targeted proposals that deal with specific failings and risk to the system as a whole, rather than responding to the wider calls for action against banks. His dispassionate, forensic approach has much to recommend it’; Stuart Fraser, the then Chairman of the Policy and Resources Committee at City of London Corporation, who welcomed Turner’s findings, albeit urging caution over the controversial issue of City pay; and Richard Saunders, the then CEO of the Investment Management Association, who commented that ‘the Turner review sets out a clear roadmap for future reform of the system. We need banks which are simpler, more transparent and once again capable of attracting private capital. The last 18 months have been devastating for the economy and for its financial infrastructure. It is encouraging to see the regulator addressing the issues with real intent and commitment to reform.’
6 See G20 Communique, ‘London Summit—Leaders’ Statement’ (2 April 2009), available at <https://www.imf.org/external/np/sec/pr/2009/pdf/g20_040209.pdf>. This unprecedented programme of intervention appears, however, to be insufficient (whether by design or quantum) to counter what is arguably a secondary liquidity-based crisis now re-emerging within the EURO zone banking sector (and, consequentially, among several of the EU Member States themselves).
7 House of Commons, ‘Themes and Trends in Regulatory Reform—Regulatory Reform Committee’, S 21–40, July 2009.
8 HM Government, ‘The Coalition: Our Programme for Government’ (20 May 2010).
9 HM Government, ‘The Coalition: Our Programme for Government’ (20 May 2010) at p 7.
10 HM Government, ‘The Coalition: Our Programme for Government’ (20 May 2010) at p 9.
11 George Osborne MP, speech at the Lord Mayor’s dinner for bankers and merchants of the City of London, Mansion House (16 June 2010).
12 The ‘twin peaks’ model of financial regulation was pioneered in Australia in 1998 (following the recommendations of the Financial System Inquiry to the Australian Treasury) and prescribes a clear demarcation between the ‘market conduct’ and ‘prudential functions’ of regulation. At the time of writing, this approach has been adopted by the Netherlands, Belgium, New Zealand, and the UK, with South Africa transitioning to this model and it having also been considered by the US. See Goodwin, Guo, and Ramsey, ‘Is Australia’s “Twin Peaks” System of Financial Regulation a Model for China?’ CIFR Paper No. 102/2016, for commentary on the ‘twin peaks’ model in the context of China’s financial system and its evolution since the Australian Financial System Inquiry report.
13 As formulated in section 2A(1) Bank of England Act 1998 (as inserted by section 238 Banking Act 2009). In particular, the FPC’s financial stability objective would include improving the resilience of the financial system by identifying and addressing aggregate risks and vulnerabilities across the system and enhancing macro-economic stability by addressing imbalances through the financial system, eg by damping the credit cycle. See, HM Treasury, ‘A New Approach to Financial Regulation: Judgement, Focus and Stability’ (Cm 7874, July 2010) para 2.24.
14 Established in 2013 as the National Crime Agency, a non-ministerial government department.
15 HM Treasury, ‘A New Approach to Financial Regulation: Judgement, Focus and Stability’ (Cm 7874, July 2010).
16 For an explanation of macro-prudential regulation see, HM Treasury, ‘A New Approach to Financial Regulation: Judgement, Focus and Stability’ (Cm 7874, July 2010) para 2.6 and Box 2.A p 10.
17 HM Treasury, ‘A New Approach to Financial Regulation: Judgement, Focus and Stability’ (Cm 7874, July 2010) para 1.15.
18 In light of the UK’s notification to leave the European Union under Article 50(2) of the Treaty on European Union, the PRA will, almost certainly, resign from any representation on the boards of the ESA. While the extent to which the PRA will be able to influence, at all, the policies of the ESAs is, at the time of writing, unknown, it is anticipated that formal ESA representation will be replaced by a form of cooperation agreement that maintains the necessary framework for managing systemic risk across European markets, in which both UK and EU based-business will continue to operate. The impact of the UK leaving the European Union (so called, ‘Brexit’) on the legal and conduct risk in financial markets will be significant enough for a standalone book on the subject. However, the immediate and most salient issues are highlighted in Ch 19.
19 HM Treasury, ‘A New Approach to Financial Regulation: Judgement, Focus and Stability’ (Cm 7874, July 2010) para 1.19. The implementation of the reformed regulatory architecture resulted in the FCA being responsible for not only the conduct of all firms carrying on regulated activities, but for the prudential regulation of those firms not otherwise prudentially regulated by the PRA.
20 An example of this can be found in the enforcement actions against The Co-operative Bank plc by both the PRA and the FCA. Notably, the FCA’s Final Notice to the bank stated the FCA’s decision not to levy a ‘substantial financial penalty’ given the overriding concern (of both authorities) to maintain the safety and soundness of the institution. The PRA’s objectives, in this instance, took precedence over the policy of the FCA to levy a financial penalty for conduct breaches. See FCA Final Notice, ‘Co-operative Bank plc’ (10 August 2015).
21 HM Treasury, ‘A New Approach to Financial Regulation: Judgement, Focus and Stability’ (Cm 7874, July 2010) para 4.7.
22 HM Treasury,‘A New Approach to Financial Regulation: Building a Stronger System’ (Cm 8012, February 2011).
23 HM Treasury, ‘A New Approach to Financial Regulation: The Blueprint for Reform’ (Cm 8083, June 2011).
24 The Independent Commission on Banking was a United Kingdom government inquiry, chaired by John Vickers, looking at structural and related non-structural reforms to the UK banking sector to promote financial stability and competition in the wake of the financial crisis of 2007–08. The Commission, its findings, and subsequent law reform is discussed in Ch 14.