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About Me

Darren Winters is a self made investment multi-millionaire and successful entrepreneur. Amongst
his many businesses he owns the number 1 investment training company in the UK and Europe.
This company provides training courses in stock market, forex and property investing and since
the year 2000 has successfully trained over 250,000 people.

Monday, 2 June 2014

The Old Lady on Threadneedle Street

The old lady on Threadneedle Street,” known as the Bank of England (BOE), is scheduled to undergo some far-reaching changes, which are designed to widen its regulatory powers and increase its accountability with the intended aim of waning off any future financial shocks.  

These sweeping changes are scheduled to be implemented on June 1, 2014 by the BOE’s governor, Mark Carney, who was appointed to head the bank in July of last year. Mr. Carney has earned his stripes in the financial world; he was the previous Governor of the Bank of Canada and was credited for shielding Canada from the worse effects of the late 2000 financial crisis. Mr. Carney started his career in Goldman Sachs.

As part of the changes to the BOE, the Financial Services Authority (FSA), a quasi-judicial body responsible for the regulation of the financial service industry in the UK, has been replaced with three new regulatory bodies; the Financial Policy Committee (FPC), the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA).
A little about all three new regulatory bodies to follow:
The Financial Policy Committee (FPC) focuses on both monetary stability, facilitating economic growth while keeping inflation under wraps, and regulatory authority, upholding the integrity of firms in the financial service sector. In other words, FPC will ensure that the system as a whole is safe and resilient to unexpected developments. FPC will have the power to direct the PRA to adjust banks’ capital requirements.
The Prudential Regulation Authority (PRA), also part of the Bank of England, as the name suggests is responsible for the prudential regulation and supervision of banks, building societies, credit unions, insurers and major investment firms. It sets standards and supervises financial institutions at the level of the individual firm. The PRA’s two main objectives are to promote the safety and soundness of financial service, thereby making a contribution to the Bank’s core purpose of protecting and enhancing the stability of the UK financial system.
The third regulatory body which has replaced the FSA is the Financial Conduct Authority (FCA). This regulatory body is responsible for regulating the financial service industry in the UK. The FCA aims to protect consumers, ensure that the industry remains stable and promote competition between financial service firms. Additionally, the FCA has rule-making, investigative and enforcement powers at their disposal to protect and regulate the financial services industry.

Impetus for change to the Bank’s structure has particularly come from David Cameron’s Conservative coalition Government who on the Commons Treasury Committee vehemently criticized the previous so called tripartite structure of “being asleep at the wheel,” during the 2008 financial crisis. The tripartite structure consisted of the then FSA, the Treasury and the Bank of England. 
Under the new structure the FPC and the PRA will both fall within the Bank’s domain, which incidentally reverses the changes made to the regulatory system by the former Labour Chancellor Gordon Brown. The changes mark a return of regulatory power to the Bank.  Advocates of the structural changes to the Bank are hoping that it will plug the gap in the previous tripartite system that left no one taking responsibility to monitor risks as a whole in the financial system, such as during the pre-2007 lending boom. George Osborne, current Conservative chancellor criticized the previous system for being "incoherent" and "without clear lines of accountability".
It is now widely recognized by financial regulators around the world that it was the lack of oversight as being the main culprit for the calamity that resulted in excessive lending, which then triggered a subprime mortgage crisis and ultimately a financial meltdown.    Financial regulators are now realizing the need for them to take on board monetary responsibilities to avoid a repeat of the 2008 financial crisis.
The FSA’s inability to rein in the banks; to avoid the collapse of Northern Rock and prevent recent banking scandals such as the Libor interbank rate-rigging affair and mis-selling of payment protection insurance (PPI) and interest rate swaps to small businesses have all been cited by advocates for the need for changes to the regulatory system. It is believed that by granting the Bank more regulatory authority and greater accountability the system will have more teeth.
Indeed with these structural changes in place the Bank’s powers will be wide reaching and comprehensive with the FPC acting as a forte of the new system, taking an all-inclusive view of the financial system. Moreover, the PRA will ensure that banks and insurers have sufficient liquidity to meet their obligations. Furthermore, the FCA will promote a climate of competition and regulate financial firms, thereby protecting consumers.

However, these changes have not come without their critics. There are concerns from some quarters that the Bank will become too powerful, given that already it has complete autonomy over its monetary policy.  The structural changes to the Bank risk jeopardizing its impartiality, according to the former head of Germany’s central bank, Axel Weber.  The Ex-Bundesbank boss “flatly refused” to take on a regulatory remit when he was head of the bank due to concerns over independence.

Additionally, a series of senior level appointments to the Bank will take effect on June 1, 2014. In summary the notable changes are as follows; The creation of a new Deputy Governor-level position for Markets and Banking; there will be an expanded role for the Chief Economist to build the Bank’s research, analysis and data capability; a new Financial Stability Strategy and Risk Directorate; A new International Directorate; A new Director, Banknotes and Chief Cashier, and a new Director for Supervision of Financial Market Infrastructures and an independent evaluation unit will also be established.

Darren Winters


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