Major changes occurring in UK financial system, says head of FSA

Kuala Lumpur, 22 October 1998

Key changes to bring about "one-stop shopping" for financial institutions, simplified international links and greater adaptability to changing environment are expected in the UK financial system, according to Howard Davies, Chairman of the Financial Services Authority (FSA), United Kingdom (UK). The FSA Chairman added that advantages of the new system will include cost effectiveness with the reduction of overheads and removal of duplication in the system.

The FSA, which is in corporate and legal terms the UK Securities and Investments Board (SIB) renamed, is a company limited by guarantee. It will acquire its full range of responsibilities in two stages, following the enactment of two pieces of legislation - the Bank of England Bill and the financial regulatory reform bill.

With the completion of the legislative process, expected by the year 2000, the regulatory scope of the FSA will, "include the role of deposit taking, which was formerly the purview of the Bank of England and the Building Societies Commission. This will entail the prudential supervision of banks, building societies and credit unions. Additionally, FSA also takes over the prudential supervision of the insurance industry and friendly societies from the insurance Directorate and Friendly Societies Commission. The FSA will also perform the former role of SIB by becoming the statutory regulator responsible for oversight of self-regulatory organisations (SROs) and exchanges," Mr. Davies explained.

"The regulatory scope of FSA will also cover the securities and derivatives business, investment management and retail investment business which were formerly, respectively, the responsibility of the Securities and Futures Authority (SFA), Investment Management Regulatory Organisation (IMRO) and the Personal Investment Authority (PIA)," the FSA Chairman added.

Key changes expected in the legislation will affect the statutory objectives of the FSA in terms of market confidence, consumer protection, consumer education and financial crime. In effecting those changes, the FSA will take into account costs and benefits, desirability of competition and innovation, prime responsibilities of management and the international position of London. The legislative changes will also result in the requirement to distinguish between wholesale and retail markets, and the FSA being granted with the power to prosecute cases of insider dealing and market manipulation, impose civil penalties in cases of market abuse and fine authorised firms for misconduct.

Mr. Davies made these remarks in his talk on "Strengthening Financial Regulation: A view from London" which was organised by the Securities Commission and was attended by representatives from market institutions and industry groups as well as SC staff. According to the SC Chairman, Dato' Dr. Mohd. Munir Majid, "The UK experience, among others, provides valuable lessons for the Securities Commission in its efforts to rationalise the regulatory framework of the capital market".


Issued on behalf of the Securities Commission. For assistance, please contact tel. no. 03-2597164 (Karen De Cruz) / 03-2507550 (Nafizah Omar) or fax no. 03-2536184.
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