Financial Services Act 2012
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| Financial Services Act 2012 | |
|---|---|
 Sodacan · CC BY-SA 3.0 · source | |
| Short title | Financial Services Act 2012 |
| Parliament | Parliament of the United Kingdom |
| Long title | An Act to amend the Financial Services and Markets Act 2000, to make other amendments relating to financial services and markets, and for connected purposes |
| Introduced by | George Osborne, Chancellor of the Exchequer |
| Royal assent | 19 December 2012 |
Financial Services Act 2012 is a significant piece of legislation in the United Kingdom that aims to reform the financial regulatory framework, following the 2008 global financial crisis and the subsequent Vickers Report and Independent Commission on Banking. The Act was introduced by George Osborne, the Chancellor of the Exchequer, and received Royal Assent on 19 December 2012, with the goal of enhancing the stability and resilience of the UK financial system, as recommended by the Bank of England and the Financial Stability Board. The Act's provisions were influenced by the experiences of Barclays, Royal Bank of Scotland, and Lloyds Banking Group during the crisis, as well as the lessons learned from the Northern Rock and Bradford & Bingley failures.
Introduction
The Financial Services Act 2012 is a key component of the UK's efforts to strengthen its financial regulatory framework, building on the recommendations of the Vickers Report and the Independent Commission on Banking, which were established by George Osborne and Vince Cable, the Secretary of State for Business, Innovation and Skills. The Act's introduction was supported by Mark Carney, the Governor of the Bank of England, and Mervyn King, the former Governor of the Bank of England, who emphasized the need for robust regulation to prevent future crises, such as the Credit crunch and the Sovereign debt crisis. The Act's provisions were also informed by the experiences of other countries, including the United States, which implemented the Dodd-Frank Wall Street Reform and Consumer Protection Act, and the European Union, which introduced the Capital Requirements Directive and the Capital Requirements Regulation.
Background
The Financial Services Act 2012 was drafted in response to the 2008 global financial crisis, which highlighted weaknesses in the UK's financial regulatory framework, including the lack of effective oversight by the Financial Services Authority and the Treasury Select Committee. The crisis led to a significant increase in UK public debt, a decline in UK economic growth, and a loss of confidence in the UK financial system, as well as the need for bailouts of Royal Bank of Scotland and Lloyds Banking Group. The Act's background is also influenced by the European sovereign-debt crisis, which affected Greece, Ireland, Portugal, and Spain, and the Eurozone crisis, which led to the establishment of the European Stability Mechanism and the European Financial Stability Facility. The UK's decision to maintain its independence from the Eurozone and the European Central Bank also played a role in shaping the Act's provisions, as did the views of David Cameron, the Prime Minister of the United Kingdom, and Nick Clegg, the Deputy Prime Minister of the United Kingdom.
Provisions
The Financial Services Act 2012 introduces several key provisions, including the establishment of the Prudential Regulation Authority and the Financial Conduct Authority, which replace the Financial Services Authority as the primary regulators of the UK financial system, with the goal of enhancing the stability and resilience of the system, as recommended by the Bank of England and the Financial Stability Board. The Act also introduces a new regulatory framework for systemically important financial institutions, such as Barclays, HSBC, and Standard Chartered, and enhances the powers of the Treasury Select Committee and the Parliamentary Commission on Banking Standards, which were established to oversee the implementation of the Act and to ensure that the UK's financial regulatory framework is effective in preventing future crises, such as the Credit crunch and the Sovereign debt crisis. The Act's provisions are also influenced by the experiences of other countries, including the United States, which implemented the Dodd-Frank Wall Street Reform and Consumer Protection Act, and the European Union, which introduced the Capital Requirements Directive and the Capital Requirements Regulation.
Implementation
The implementation of the Financial Services Act 2012 is being overseen by the Treasury Select Committee and the Parliamentary Commission on Banking Standards, which are working closely with the Prudential Regulation Authority and the Financial Conduct Authority to ensure that the Act's provisions are effective in enhancing the stability and resilience of the UK financial system, as recommended by the Bank of England and the Financial Stability Board. The implementation process is also being informed by the experiences of other countries, including the United States, which implemented the Dodd-Frank Wall Street Reform and Consumer Protection Act, and the European Union, which introduced the Capital Requirements Directive and the Capital Requirements Regulation. The Act's implementation is being supported by Mark Carney, the Governor of the Bank of England, and Martin Wheatley, the former Chief Executive of the Financial Conduct Authority, who have emphasized the need for robust regulation to prevent future crises, such as the Credit crunch and the Sovereign debt crisis.
Impact
The Financial Services Act 2012 is expected to have a significant impact on the UK financial system, enhancing its stability and resilience, and reducing the risk of future crises, such as the Credit crunch and the Sovereign debt crisis. The Act's provisions are also expected to improve the effectiveness of regulation, increase transparency and accountability, and enhance the protection of consumers, as recommended by the Financial Ombudsman Service and the Financial Services Consumer Panel. The Act's impact will be closely monitored by the Treasury Select Committee and the Parliamentary Commission on Banking Standards, which will work closely with the Prudential Regulation Authority and the Financial Conduct Authority to ensure that the Act's provisions are effective in achieving its objectives, and that the UK financial system remains stable and resilient, as emphasized by David Cameron, the Prime Minister of the United Kingdom, and Nick Clegg, the Deputy Prime Minister of the United Kingdom.
Reception
The Financial Services Act 2012 has received a generally positive reception from the UK financial industry, with many banks and financial institutions welcoming the Act's provisions, which are designed to enhance the stability and resilience of the UK financial system, as recommended by the Bank of England and the Financial Stability Board. The Act has also been supported by consumer groups, such as the Financial Services Consumer Panel and the Which? organization, which have emphasized the need for robust regulation to protect consumers, as well as by regulatory bodies, such as the European Securities and Markets Authority and the International Organization of Securities Commissions. However, some critics have argued that the Act does not go far enough in addressing the underlying causes of the 2008 global financial crisis, and that more needs to be done to prevent future crises, such as the Credit crunch and the Sovereign debt crisis, as emphasized by George Osborne, the Chancellor of the Exchequer, and Vince Cable, the Secretary of State for Business, Innovation and Skills.