The Financial Services Authority (FSA) welcomes the publication of the Walker Review on governance of banks and other financial institutions and believes its recommendations will inform the debate around strengthening corporate governance in UK boardrooms.
Many of the recommendations complement the work the FSA is currently doing in respect of risk management, remuneration policies and strengthening the approval process for significant influence functions (SIFs). The FSA’s consultation on its Remuneration Code of Practice closed on 18 May and a policy statement outlining proposed Handbook changes will be issued in the Summer.
The FSA will contribute to the consultation process and will issue a paper in the autumn, which will outline the FSA's proposed response to any final recommendations of the Walker Review that may have implications for FSA procedures or its interaction with the firms it regulates.
Over 65s most likely to be targeted by share fraudsters, warns FSA
35% of people targeted by share fraudsters in the last year were over 65;
23% of people aged over 65 felt they could become victims of fraud in 2009,
yet nearly 49% did not think there was enough information on how to protect themselves from fraud; and 41% of the people questioned who did not know that fraudsters could use personal details in passports, driving licences and mortgage applications to steal their identity, were aged over 65.
New banking regulation promotes fairness for consumers
The Financial Services Authority (FSA) will take over all retail banking conduct regulation for deposit taking and payment services in November 2009.
Currently, the Banking Code Standards Board (BCSB) monitors and enforces voluntary Banking Codes which govern banks’ day to day relationships with their customers.
From November, these arrangements will be replaced by new FSA rules which all banks, building societies and credit unions must follow.
The FSA has published its response to the Chancellor of the Exchequer outlining the key points in the development of problems at Dunfermline Building Society and the FSA's supervisory approach.
The full contents of this letter can be found at the following link on the FSA's website:
The Financial Services Authority (FSA) has today published a consultation paper (CP) which formally consults on whether to incorporate its Code of practice on remuneration into the Handbook and its application to large banks and broker dealers.
18 March 2009 The FSA publishes “The Turner Review”: a wide-ranging review of global banking regulation The Financial Services Authority (FSA) has today published the Turner Review of global banking regulation. Lord Turner, chairman of the FSA, was asked by the Chancellor of the Exchequer to review the events that led to the financial crisis and to recommend reforms.
The Review identifies three underlying causes of the crisis – macro-economic imbalances, financial innovation of little social value and important deficiencies in key bank capital and liquidity regulations. These were underpinned by an exaggerated faith in rational and self-correcting markets.
It stresses the importance of regulation and supervision being based on a system-wide “macro-prudential” approach rather than focussing solely on specific firms. It recommends:
- Fundamental changes to bank capital and liquidity regulations and to bank published accounts;
- More and higher quality bank capital, with several times as much capital required to support risky trading activity;
- Counter-cyclical capital buffers, building up in good economic times so that they can be drawn on in downturns, and reflected in published account estimates of future potential losses;
- A central role for much tighter regulation of liquidity;
- Regulation of “shadow banking” activities on the basis of economic substance not legal form: increased reporting requirements for unregulated financial institutions such as hedge funds, and regulator powers to extend capital regulation;
- Regulation of Credit Rating Agencies to limit conflicts of interest and inappropriate application of rating techniques;
- National and international action to ensure that remuneration policies are designed to discourage excessive risk-taking;
- Major changes in the FSA’s supervisory approach, building on the existing Supervisory Enhancement Programme (SEP), with a focus on business strategies and system wide risks, rather than internal processes and structures; and
- Major reforms in the regulation of the European banking market, combining a new European regulatory authority and increased national powers to constrain risky cross-border activity.
The Turner Review distinguishes between those areas where the FSA has already taken action, those where the FSA can proceed nationally, and those where international agreement needs to be achieved. It also recognises that there may be alternative specific ways to achieve the essential objectives of effective regulation.
In addition the Review highlights areas where it is premature to recommend specific action, but where wide-ranging options need to be debated. These include product regulation in retail (e.g. mortgage) and wholesale (e.g. CDS) markets.
Lord Turner said:
“The financial crisis has challenged the intellectual assumptions on which previous
regulatory approaches were largely built, and in particular the theory of rational and self-
correcting markets. Much financial innovation has proved of little value, and market
discipline of individual bank strategies has often proved ineffective.
“A global market economy remains the best means of delivering global prosperity: it requires a global banking system focussed on serving the needs of businesses and households, not in taking risks for quick return. Major changes in regulation and in supervisory approach are required to deliver that.
"The approach has to build on a system-wide perspective: failure to look at the big
picture was far more important to the origins of the crisis than any specific failures in
supervising individual firms. And it must reflect the reality of a global financial system
without a global government; we need both far more intense international cooperation
and greater use of national powers.
“The changes recommended are profound, and the banking system of the future will be different from that of the last decade. The world’s economy will be better served as a result.”
Lord Turner warns that the transition to higher bank capital will need to be managed carefully. UK banks are now capitalised at a level which will enable them to absorb severe stresses, and the short-term priority is to maintain bank lending to the real economy.
Published alongside the Review is an FSA discussion paper (DP) which sets out more detail on specific policy proposals. As the current crisis arose in the banking, investment banking and “shadow banking” sectors, most of these proposals focus on these sectors. Possible implications for some other sectors are however identified.
Turner Review must not unbalance FSA In response to today’s publication of the Turner Review by the FSA, Adam Phillips, the FSCP’s Acting Chairman said:
“Adair Turner should be congratulated for his candid assessment of what went wrong leading up to the current financial crisis. However, we are concerned that the Turner Review, for all its revealing content and excellent analysis, has not commented on the appalling way which banks have treated their customers both before and during the banking crisis. The review suggests that the FSA has been biased towards conduct of business rather than prudential regulation of banks. However recent history in terms of bank charges, the selling of PPI and mortgages shows that the FSA cannot be allowed to think it has the regulation of the consumer facing side of financial services under control.
We look forward to engaging in the debate on the Turner Review. We will be looking closely at how the proposals impact on consumers and deliver demonstrably better outcomes for them.”
www.fs-cp.org.uk
FSA 13/03 Consumer Warnings:
UK Expatriates Independent Financial Advisory Services (UEIFAS)
- The Financial Services Authority (FSA) has issued a consumer warning about UK Expatriates Independent Financial Advisory Services (UEIFAS) which operates form Middlesbrough and Wrexham.
The Financial Associate (TFA) Limited
- The Financial Services Authority (FSA) has issued a consumer warning about The Financial Associate (TFA) Limited of Sidcup, Kent.
FSA New Contracts for Difference disclosure regime to take effect in June
Following extensive consultation and to help improve transparency in current market conditions, the new disclosure regime for Contracts for Difference (CfDs) will now take effect from 1 June 2009. The new rules would have applied originally from September 2009.
Details of the new regime are set out in a Policy Statement on CfDs published today by the Financial Services Authority (FSA).
The new rules cover financial instruments in the same company, which give a legal right to acquire shares or have a similar economic effect to shares. Shares and such financial instruments will have to be aggregated and disclosed once over the 3% threshold. This will ensure that they are not used covertly to influence corporate governance and/or build up stakes in companies. An exemption has also been put in place for CfD writers acting in a client-serving capacity, to prevent unnecessary disclosures to the market.
Alexander Justham, FSA director of markets, said:
“This is a very significant step in improving market transparency and we have brought the implementation date forward to reflect that. The new rules will resolve some of the concerns raised about the risks of market players devising ways to avoid disclosure or over-disclosing.”
FSA bans Wakefield mortgage broker for fraud
The Financial Services Authority (FSA) has banned Wakefield-based mortgage adviser Mohammed Ahmed for submitting mortgage applications on his and a customer’s behalf that were supported by false payslips.
Jonathan Phelan, head of retail enforcement at the FSA, said:
“Mr Ahmed lacks honesty and integrity in relation to his own personal financial dealings. His actions were serious and blatant. As this case demonstrates, our crackdown on mortgage fraud includes paying attention to the work of individual mortgage advisers and introducers as well as to approved persons and authorised firms. We banned over 20 mortgage brokers last year, and we will continue to make examples of people who commit mortgage fraud and who help others to commit mortgage fraud, in order to change behaviour.”
The FSA found that Mr Ahmed: submitted three mortgage applications containing false information about his personal and financial circumstances. The applications were supported by the submission of false P60 forms and payslips; failed to disclose the true extent of his property holdings when applying for a mortgage; and while working for The Mortgage Exchange, was knowingly concerned in the submission of false mortgage applications on behalf of eight customers.
