The FSA sprang into being in 1997 at the behest of then-chancellor Gordon Brown — it was previously known as the Securities and Investments Board, but in the post-Barings collapse era, Brown decided to end self-regulation and consolidate the myriad regulatory bodies.
In 2008 another banking catastrophe came along and the FSA was accused of failing to spot it in advance, so in 2010 current chancellor George Osborne announced he would abolish the FSA and replace it with the three new regulatory organisations:
The Prudential Regulation Authority (PRA) will ensure banks, building societies and insurance companies have enough capital to prevent them failing.
The Financial Policy Committee (FPC) is run by the Bank of England and will oversee the FCA and PRA. This means that the BoE has much more control over the financial service industry. Its job is to spot any impending risks to banking and head them off. The FPC has already ruffled some feathers by demanding that several unnamed banks raise a cool £25bn by the end of this year to mitigate potential losses.
Like certain other industry watchdogs in the news recently, the FSA was accused of being 'toothless' and failing to rein in some of banking's worst offenders — the organisation famously failed to find any evidence against former RBS directors after the bank was bailed out. The new regulatory bodies will have powers to suspend or ban questionable financial products (like the debt ones which played a part in the 2008 crisis), issue fines and have promised a 'more intrusive approach to regulation'. And we think that's quite enough abbreviations for one day.
See Londonist's guides to the financial markets:
- London Financial Institutions: A Beginner’s Guide
- The Beginner’s Guide To Financial Markets: Foreign Exchange
- The Beginner’s Guide to Financial Markets: Equities
- The Beginner’s Guide To Financial Markets: Commodities
- The Beginner’s Guide To Financial Markets: Derivatives
- The Beginner's Guide To Financial Markets: Bonds
Photo by snoopy.mitchell in the Londonist Flickr pool.