The mitosis of the FSA: into PRA and FCA

In the coming weeks there will be a change to the way financial services will be regulated in the UK. 1 April 2013 will see the end of the Financial Services Authority (FSA) and the creation of two organisations: the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA). Chancellor George Osborne announced the split back in 2010 with the objective to improve consumer protection and better policing of the City and the banking system.

 
The PRA will be a subsidiary of the Bank of England accountable for the regulation of banks, building societies, insurers and major investment firms, to help diminish the adverse effects that they can have on the UK financial system. The FCA will be responsible for the regulation of all financial services firms, and the proper functioning of all relevant markets. The FCA will have significant powers such as control to regulate conduct related to the marketing of financial products as well as ensuring products go through a ‘testing process’.

 
The creation of two new regulators may well push up regulation costs, there is also unease that there are still exist products that are beyond the regulatory scope such as land banking and carbon-credit trading. However, the Chancellor will primarily be hoping that the new organisations can overcome the shortcomings of their predecessor, which failed to oversee the banking Libor and payment protection insurance (PPI) scandals.