Featured Product

    Victoria Saporta of BoE Outlines Ideal Post-EU Regulatory Framework

    March 10, 2020

    While speaking at a conference in London, Vicky Saporta of BoE discussed how banks and other financial firms should be regulated now that UK has left EU. Ms. Saporta sets out a framework for thinking about an ideal system of regulation for the future and argues that the financial system in the UK is more stable because the regulatory authorities are independent. In her speech, she builds on the principles that Sam Woods had set out last year to which any future UK regulatory framework should adhere. She builds on these principles to propose an ideal framework from the perspective of achieving the objectives of BoE. She then looked at whether the existing empirical evidence, including some new research, supports the framework.

    Ms. Saporta maps the principles outlined by Sam Woods last year into three ideal features of the institutional structure of the prudential regulation: dynamism, time consistency, and legitimacy. She highlights that the regulatory authority needs to be given a mandate to achieve legitimacy. A mandate provides a regulator with legitimacy in two ways. First, it ensures there is democratic control over the shape of the regulatory regime; for example, the objective or objectives of the prudential regulation, the types of firm in scope, and the issues the regulator must have regard to in making policy. Second, it makes possible to hold the regulator to account. 

    Next, she sets out four alternative models for the institutional structure for prudential regulation. In the first model, prudential regulation is specified in primary legislation. In the second model, prudential regulatory power-setting could lie with government ministers. In the third model, these powers could be given to an independent regulatory body. This model is likely to ensure that prudential regulation is both dynamic and time-consistent. An expert regulator would be able to identify and implement necessary dynamic adjustments, and, for reputation reasons, it would have an incentive to maintain prudential standards provided that it avoided industry capture. However, in the absence of further accountability mechanisms to enhance it, this model would lack legitimacy. Keeping this in mind, she sets out and advocates the fourth model of prudential regulation. 

    This fourth model involves an independent regulatory body with a clear mandate set out in primary legislation and a clear set of accountability mechanisms to Parliament. This model combines the benefits of an expert regulator that can adjust prudential regulation dynamically, with an objective that incentivizes the regulator to maintain prudential standards, while using the mandate and the accountability mechanisms to ensure legitimacy. In theory at least, this fourth model is preferable because, unlike the other models, it possesses all three of the ideal features, according to Ms. Saporta. In this context, she also examines the mandates of various financial sector regulators in the UK. She highlights that this model of independent regulators with mandates making rules is common practice in most jurisdictions outside the UK. Finally, she discusses the evidence supporting the theory that the independence of prudential regulation increases financial stability with no cost to efficiency.

     

    Related Links

    Keywords: Europe, EU, UK, Banking, Post-Brexit, Regulatory Framework, Brexit, Victoria Saporta, BoE

    Related Articles
    News

    ECB Further Reviews Costs and Benefits Associated with IReF

    The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.

    September 15, 2022 WebPage Regulatory News
    News

    BCBS to Finalize Crypto Rules by End-2022; US to Propose Basel 3 Rules

    The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.

    September 15, 2022 WebPage Regulatory News
    News

    IOSCO Welcomes Work on Sustainability-Related Corporate Reporting

    The International Organization of Securities Commissions (IOSCO) welcomed the work of the international audit and assurance standard setters—the International Auditing and Assurance Standards Board (IAASB)

    September 15, 2022 WebPage Regulatory News
    News

    EBA Publishes Funding Plans Report, Receives EMAS Certification

    The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).

    September 15, 2022 WebPage Regulatory News
    News

    BoE Allows One-Day Delay in Statistical Data Submissions by Banks

    The Bank of England (BoE) published a Statistical Notice (2022/18), which informs that due to the Bank Holiday granted for Her Majesty Queen Elizabeth II’s State Funeral on Monday September 19, 2022.

    September 14, 2022 WebPage Regulatory News
    News

    ACPR Amends Reporting Module Timelines Under EBA Framework 3.2

    The French Prudential Control and Resolution Authority (ACPR) announced that the European Banking Authority (EBA) has updated its filing rules and the implementation dates for certain modules of the EBA reporting framework 3.2.

    September 14, 2022 WebPage Regulatory News
    News

    APRA to Modernize Prudential Architecture, Reduces Liquidity Facility

    The Australian Prudential Regulation Authority (APRA) announced reduction in the aggregate Committed Liquidity Facility (CLF) for authorized deposit-taking entities to ~USD 33 billion on September 01, 2022.

    September 12, 2022 WebPage Regulatory News
    News

    PBC Issues List of Systemic Banks, Adds 2 Foreign Banks to CERB List

    The China Banking and Insurance Regulatory Commission (CBIRC) published the administrative measures for internal control of wealth management companies, which come into force on the day of promulgation.

    September 09, 2022 WebPage Regulatory News
    News

    PRA Publishes Discussion Paper on Its Future Approach to Policy

    The Prudential Regulation Authority (PRA) proposed its approach to policy-making as it takes on wider rulemaking responsibilities under the Financial Services and Markets Bill.

    September 08, 2022 WebPage Regulatory News
    News

    ECB Publishes Opinion on Proposed Regulation on Data Act

    The European Central Bank (ECB) published its opinion on the proposal for a regulation on harmonized rules on fair access to and use of data (Data Act).

    September 08, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8511