Financial Services Regulation in the UK

Practice flashcards covering the key concepts, regulatory bodies, and terminology related to the UK financial services regulatory landscape based on the lecture notes.

Financial Conduct Authority (FCA)

The UK regulatory body with the overarching strategic objective to ensure that relevant markets function well, with operational objectives to protect consumers, protect financial markets, and promote competition.

Prudential Regulation Authority (PRA)

Part of the Bank of England responsible for the authorisation, prudential regulation, and supervision of banks, building societies, credit unions, insurers, and major investment firms.

Financial Policy Committee (FPC)

A committee within the Bank of England responsible for horizon scanning for emerging risks to the financial system as a whole (macro-prudential supervision) and providing strategic direction for the regulatory regime.

Prudential Regulation Committee (PRC)

The governing body of the PRA that replaced the PRA Board, making the authority's most important decisions and placed on the same legal footing as the Monetary Policy Committee.

Macro-prudential tools

Policy measures used by the FPC to counteract systemic risk, such as imposing leverage limits on banks, enforcing capital requirements for asset classes, and setting countercyclical capital buffers.

Systemic risk

The risk of an entire market or financial system collapsing, as opposed to the risk associated with individual firms.

Part 4A permission

The authorization required under the Financial Services and Markets Act 2000 for any business or individual wishing to carry out one or more regulated activities by way of business.

Threshold Conditions

Statutory requirements that firms must meet to be authorized, including maintaining appropriate capital and liquidity and having suitable management.

Free asset ratio (FAR)

A measure of a life office's financial strength calculated as $FAR = \frac{\text{Total Assets} - \text{Liabilities}}{\text{Total Assets}} \times 100$.

Fixed portfolio firms

A small population of firms with the greatest potential impact on consumers and markets that require the highest level of supervisory attention and dedicated supervisory oversight.

Flexible portfolio firms

The majority of FCA-regulated firms which are supervised through a reactive combination of market-based thematic work and programs of communication, rather than being allocated a named individual supervisor.

Regulatory Decisions Committee (RDC)

A committee of the FCA Board that acts as the decision-maker for enforcement matters that do not settle, with members reflecting the interests of industry and consumers.

Upper Tribunal (Tax and Chancery Chamber)

An independent body that handles appeals in the decisions process for those who do not agree with a decision made by the Regulatory Decisions Committee.

Skilled persons report (Section 166 report)

A review the FCA can require from an independent third party to obtain expert advice or information regarding aspects of a firm's activities for diagnostic, monitoring, or remedial purposes.

Consumer Duty

An FCA initiative introduced in 2022 that sets higher expectations for the standard of care firms provide, including a new consumer principle and cross-cutting rules to support consumer outcomes.

Market abuse

Improper conduct that undermines the UK financial markets, including insider dealing, unlawful disclosure, manipulating transactions, and disseminating false or misleading information.

Insider dealing

A criminal offence defined in the Criminal Justice Act 1993 where individuals use information about a company that is not generally available to deal for their own financial advantage.

Financial Stability Board (FSB)

An international body that promotes international financial stability by coordinating national financial authorities and international standard-setting bodies to develop and implement regulatory policies.

Principle 4

The regulatory principle requiring a firm to maintain adequate financial resources, including both capital and liquidity resources.

Senior Managers and Certification Regime (SM&CR)

A regulatory framework designed to ensure that senior management are held responsible for a firm's activities and for ensuring that the business complies with regulatory requirements.