UK Financial Regulation Reflecting Back Essay

Download this Essay in word format (.doc)

Note: Sample below may appear distorted but all corresponding word document files contain proper formatting

Excerpt from Essay:

6% holding in Lloyds following huge losses at both during the credit crisis" (Gupta. S. March 16, 2011) point to the need for stronger regulation of the financial sector. The UK banking system which is one of the most successful and innovative in the world must continue to have autonomy in its operations. Over regulation will only stifle an industry which is a key to the return of a strong economy, particularly in light of the austerity measures of the coalition government which will slow government expenditures to buttress an economic recovery. A greater emphasis on firm specific activities which will encompass leverage, capital ratios, balance sheet assets and liabilities is not over regulation but rather smarter regulation.

In contemplating reform the FCA will ensure that the focus of the financial sector is on the individuals who utilize their products not the shareholders who reap the gains from profits. The FCA will make the important determinations on which financial instruments are for the benefit of the greater population while still allowing the banking firms to generate a profitable return. The FCA may be the single most important aspect of financial reform in its protection of the consumer and its limits on financial product excess.

Framing the Debate

Financial regulatory reform is not about taking action simply because something must be done; rather it is an acknowledgement that "there were real and significant failings in the UK regulatory framework. This meant that regulators failed in recognizing and responding to the problems that were emerging in the financial system" (HM Treasury. July 2010. P.7.). Lord Turner describes this problem as 'underlap', "a phenomenon whereby macro-prudential risk analysis and mitigation fell between the gaps in the UK regulatory system" (HM Treasury. July 2010. P.8.). The solution presented is to fill these gaps with the aforementioned regulatory agencies FPC, PRA, and the FCA. Additionally, these agencies will be given the tools by which to effectively manage the systemic and individual firm risks that arise. These policy levers were not at the disposal of the Bank of England, Treasury or the FSA and as such the necessary actions to prevent the crisis before it erupted were not initiated.

The obverse to this framing of the regulatory overhaul is that the 'underlap' was in fact a regulatory scheme that simply had too many moving pieces, which not only did not work in concert but may have engendered an environment in which resources were misallocated and leverage and excess were inflated. Given the considerable weight of global policy makers' view on risk and leverage and the need for more government regulation, a UK proposal without a regulatory scheme designed to solve 'underlap is not palatable.

Conclusion and Findings

The government response to the financial crisis is a complete overhaul of the existing tripartite framework. The new structure is designed to identify systemic risk and manage it through three new agencies: FPC, PRA, and FCA all of which have individual focus on key areas ensuring financial stability. The result will be a regulatory correction to 'underlap' and its deleterious effects on the UK financial system. In developing this new strategic framework policy makers focused on several key themes, two of which are critical for the long-term success of the legislation. First "the need for the regulatory authorities' core statutory objectives to be balanced and supplemented with other factors; and second the importance of effective coordination between the new regulatory authorities (HM Treasury. February 2011. P.10.). It will remain to be seen if once implemented the reform package will satisfy these themes however, the construct presented does move the UK financial sector toward a more intelligent and responsive regulatory structure; which will benefit customers, taxpayers, and firms during periods of robust economic growth and during the travails of recession and financial upheaval which will invariably occur again.


BBC (N.D.). Timeline: Credit crunch to downturn. BBC

Retrieved March 24, 2011 from

Gupta, S. (March 16, 2011). UK should get "handsome return" on RBS and Lloyds.

Reuters. Retrieved March 24, 2011 from

HM Treasury. (July 2010). A new approach to financial regulation: judgment, focus and stability. HM Treasury. PP. 1-76. Retrieved March 24, 2011

HM Treasury. (November 2010). A new approach to financial regulation: summary of Consultation responses. HM Treasury. PP. 1-29. Retrieved March 24, 2011

HM Treasury. (February 2011). A new approach to…[continue]

Cite This Essay:

"UK Financial Regulation Reflecting Back" (2011, March 24) Retrieved October 25, 2016, from

"UK Financial Regulation Reflecting Back" 24 March 2011. Web.25 October. 2016. <>

"UK Financial Regulation Reflecting Back", 24 March 2011, Accessed.25 October. 2016,

Other Documents Pertaining To This Topic

  • UK Decline How Many Times

    Carrabine, Lee and South 193) Industrial/Infrastructural Decline As has been said before, the UK no longer makes anything, builds anything or sells anything tangible. The decline in industrial production has resulted in an overall decline in employment of industrial workers, who have not been aided by a failing system to transition to other work. Some would say that the changes occurring in the UK, at this time with the increased importance of service

  • Managing Sustainability Bt Group in UK

    These tiny particles are poison and damage the green effect. For the reason that they reflect solar energy back into space they have a preservation result on the world. Ocean current is a problem because it has an effect on the greenhouse. Also, ocean currents are something that has been able to move vast amounts of all heat all over the planet. Also, winds are what push horizontally towards the

  • Coffee Shop in Luton UK

    45). Threats Some times on my workdays, I encounter challenges and obstacles that I need to be ready to face. Some customers are not happy with the coffee rooms and demand a refund. Besides, other guests become extremely angry and may want to inform the senior management. Our competition is other coffee houses, which is right next to us. The hotel is closed for now, but a lot of work is

  • Credit Crunch on UK Residential

    While it was generally agreed that the increase in prices was due mainly to an insufficient offer as the stock house was limited, opinions have also been forwarded according to which the buy-to-let purchases have contributed to the inflation of the house prices (Property Mark). The debate concerning the reasons for the massive price increases for residential properties (materialized mostly between 1996 and 2005) is however still ongoing. On the

  • Sustainability in the UK Construction

    Buildings will be required to obtain energy certification. At the current time, construction engineers are the most likely candidate for the job. This being the case, it is estimated that approximately 12,000 engineers will need to be retained to carry out these functions (Coverdale, 2002). As one can see, the EPBD will place a strain on the construction industry in terms of knowledge and the manpower needed to carry out

  • Financial Proposal Dorchester Ltd As Discussed in

    Financial Proposal: Dorchester, Ltd. As discussed in earlier papers, for Dorchester, the final decision as to which particular nation to invest in is dependent on a range of distinct scenarios; these factors naturally impact the selected acquisition target. Before the acquisition target is selected, the nation which houses the potential acquisition target needs to be scrutinized closely. For instance, the trade environment of the nation where the prospective acquisition is located

  • Financial System Reforms Over the

    3.2.3 Portfolio Diversification of Investment in Global Property Markets Because the global property markets are affected by globalization and specific country / regional factors, means that the overall amounts of risks will vary, the most notable include: transparency and efficiency. Where, each country / region has different on laws and regulations pertaining to the real estate markets. This means that the risks in a number of different markets will depend upon

Read Full Essay
Copyright 2016 . All Rights Reserved