Banking Law

Student’s Name

Institutional Affiliation

Course

Date

Banking Law

Introduction

The financial conduct Authority (FCA) refers to a financial regulatory entity responsible for the functioning of the Uk’s Financial markets. The organization’s main objective is to ensure fair and honest needs for individuals, businesses, and the economy as a whole. The organization achieves its objectives by protecting consumers, protecting the financial markets, and promoting competition. It is essential to highlight that FCA has the authority to impose its mandates, such as rule-making and analytical power¹. The organization can raise fees, which is necessary since it is a sovereign body and does not get any government support. Therefore, FCA charges fees to allow companies that do activities regulated by the FCA and other firms such as recognized investment exchange.

On the other hand, Prudential Regulation Authority (PRA) is a segment of the Bank of England. It is accountable for the management and prudent directive of building societies, credit merger, insurers, and significant venture firms. The organization must set standards and supervise financial establishment at the level of the entity firm. The main objective of PRA includes promoting the soundness and safety of the organization and contributing to the protected of a suitable degree of security of policyholders. Also, it facilitates practical competitions between the various firms.

For this reason, the organizations are an essential donation to the Bank’s primary purpose of enhancing and protecting the constancy of the UK fiscal system. Through regulations, PRA sets the principles to which it expects firms to adhere and monitor compliance against them. It also evaluates the risks an organization may cause to financial constancy in the prospect and take deed against those that it considers posing the most significant threat.

Despite PRA and FCA being independent organizations, they have replaced the Financial Services Authority (FSA). FSA was replaced due to an apparent lack of efficient control and management of the recent monetary crisis and its incapacity to cater to the customers’ interests. Therefore, PRA and FCA were introduced to adopt a different approach and culture to management of the UK financial services business, eventually ensuring that the sector is better prepared and can handle any potential financial calamities². Currently, FCA acts as a watchdog for the behavior of the regulated and authorized persons and firms. At the same time, the PRA will be accountable for prudential issues of guaranteeing the financial stability of the larger organization.

The introduction of PRA and FCA means that the firm and the individual can be dual-regulated. It is important to note that the two regulators have diverse principles and dissimilar remits, but they have the same schedule, including analyzing and interrogating a firm’s business model. Therefore, all the organizations will be managed by the FCA while banks, joint societies, and some larger trading institutes will have a dual guideline from the PRA. It is essential to note that both PRA and FCA will be gradually engaged in the action to enact, apply, enforce and oversee European Union (EU) and global principles.

It is essential to highlight that the firms will be required to undertake modifications due to the change in the authoritarian philosophy. For the FCA, the regulators will offer more enforcement incidences, pursue more consumers, and continue to look for criminal action for insider trade and market operation. The FCA will inflict more significant levels of precision to take care of the consumer’s interest while pursuing a well-functioning market³. The PRA is known to be more judgment-led and can intervene rapidly than the FSA where required and to demand more explanation and consideration from a firm’s senior supervision.

PRA and FCA working together will result in significant changes that will help manage the financial system. However, the changes will not be noted immediately since it will take some time for the new model to be effective. For instance, the FCA has set itself to a transparent purpose, resulting in customers becoming more aware of the actual risks being taken when involving in critical financial dealings. Also, the prospect of consumers and suppliers of financial goods may be changed and turn to be fairer and more practical. Ideally, the two controllers are pushing for exterior information that reflects what is found internally within a firm⁴. Therefore, it is clear that the two organizations working together would benefit the consumers and the financial system.

The introduction of the PRA and FCA shows that it is an outdated view to demonstrate latently towards steadiness in the confidence that assuming basics are met, the manager will be content. This is not the circumstances, as the new organization are clarifying that on the off chance that they have the inspiration to research a firm, despite of whether on a superficial level all emerge to be well, when they have the force and benefit to do as such. It is like this fundamental that organizations embrace a supportive dynamic culture towards consistency. Similarly, as with everything, those organizations which are ready for the new systems are at a particular benefit over those that have not answered⁵. The best practice would be for them to dig thoughtful into the authority records distributed and acquire a solid understanding of how the double managerial design will work and what is being requisite.

In conclusion, despite PRA and FCA being different organizations, they significantly impact when they work together. The two organizations have other objectives but are all centered on ensuring the customers are taken care of and that the financial system is well protected. The two business models will help achieve what the FSA failed to do and assist in implementing positive changes in different organizations. FCA has set itself to a transparent purpose, resulting in customers becoming more conscious of the real risks being taken when being involved in critical financial contacts. Also, The PRA intends to be more judgment-led and can intervene rapidly than the FSA where required and to demand more in conditions of explaining and considerate from a firm’s senior supervision. Therefore, the introduction of PRA and FCA will help the government handle the financial crisis and ensure that the customers are protected.

References

Curi, C., & Lozano-Vivas, A. (2020). Managerial ability as a tool for prudential regulation. Journal of Economic Behavior & Organization, 174, 87-107.

Janah, I. W. (2020). Islamic law review against the effectiveness of personal data protection of financial technology consumers by financial services authority: Study in Financial Services Authority Jakarta (Doctoral dissertation, Universitas Islam Negeri Maulana Malik Ibrahim).

Mustafa, J. A. (2020). The Impact of Prudential Regulation on Jordanian Banks Liquidity. International Journal of Business and Economics Research, 9(5), 342.

Powley, H., & Stanton, K. 9 Financial conduct in the UK’s banking sector.