Revisiting the Rationale for a Single National Financial Services Regulator

Abstract

In an earlier paper (Briault, 1999) I put forward the case for a single national financial services regulator. Such a regulator, covering a broad range of financial services activities and spanning both prudential and conduct of business regulation, should be well placed to deliver effective, efficient and properly differentiated regulation in the current financial environment in the UK. That paper described the formation of the UK Financial Services Authority (FSA) and similar developments in other countries. It also discussed the factors which supported the creation of an integrated financial services regulator and commented on the relationship between a single regulator and a central bank. So why revisit this case now? The purpose of this paper 1 is not simply to repeat the arguments set out in the earlier paper, but to review developments over the last three and a half years in the UK in an attempt to measure the performance of the FSA against the rationale for creating it in the first place. The FSA has gained some useful experience over this period from which to begin to draw some tentative conclusions about the success or otherwise of a single financial services regulator in the UK, even if these conclusions must be subject to qualifications at this stage. And although the FSA has been acting in most respects as a single regulator for the last three and a half years (see Briault, 1999, page 7), it only came fully into existence at midnight on 30 November 2001, when the Financial Services and Markets Act 2000 (FSMA) came into force. The alphabet soup of the previous regulatory bodies, as Michael Taylor once described them (Taylor, 1995, page 7), has finally disappeared.