View this article online: https://www.insurancejournal.com/news/international/2010/06/17/110806.htm
A bulletin from the UK’s Financial Services Authority (FSA) indicates that its Chairman, Lord Turner, has “welcomed the changes to financial regulation outlined by the Chancellor of the Exchequer in his Mansion House speech this evening, and Hector Sants’ [the FSA’s CEO] agreement to remain as Chief Executive of the FSA, leading the transition and the creation of a new prudential authority.”
In the speech the UK’s new Finance Minister (Chancellor of the Exchequer), George Osborne, outlined plans to radically overhaul the UK’s financial regulatory system, affecting both banks and the insurance industry [See IJ web site – https://www.insurancejournal.com/news/international/2010/06/16/110766.htm ].
He announced plans to establish a new “Prudential Authority,” which would operate as a subsidiary under the direct control of the Bank of England (BoE). The FSA’s authority would be gradually phased out, and the organization itself would disappear entirely in 2012.
Turner stated:”The FSA now has the clarity of direction and timescale as well as the leadership that we need to meet the challenges ahead.”
Sants, who cancelled his scheduled retirement in order to lead the transition, is now in line to become the first Chief Executive of the Prudential Authority and a Deputy Governor of the Bank of England.
Explaining the need for the changes, Turner indicated that the “[financial] crisis demonstrated the need for new regulatory approaches and more intense supervision, and the FSA has already implemented major change. But it also demonstrated the need to bridge the gap between macro-prudential policy and the supervision of individual firms.
“The Chancellor’s proposals for prudential regulation will enable us to do that, while building on the major changes we have made over the last few years. The timescale will enable us to manage the transition in a smooth and orderly way.”
While saying nothing definitive about future regulatory changes concerning the insurance industry, Turner did indicate that in the realm of “retail customer protection, the FSA has recognized the need for a shift in our past approach, moving to the more interventionist approach which we set out in our recently published Retail Conduct Strategy.
“The new Consumer Protection and Markets Authority will have a strong focus on this challenge, while also maintaining strong focus on conduct issues in wholesale products.” His main focus, however, was on how these proto-institutions would regulate market activities relating to “exchanges, clearing infrastructure and prudential issues.”
It remains to be seen what the new regulatory scheme may mean for the UK’s insurance industry. Many of its leading figures have expressed concern over placing the industry under the control of the Bank of England. While life insurers, annuity and pension providers might be proper subjects for banking type regulations, the UK’s P/C industry, led by Lloyd’s, is a different animal.
Source: Financial Services Authority