What Is the Financial Services Authority?
The Financial Services Authority (FSA) was the agency that regulated financial services in the United Kingdom between 2001 and 2013. The regulatory authority was formally divided in 2013 into the Financial Conduct Authority and the Prudential Regulation Authority of the Bank of England.
Understanding the Financial Services Authority (FSA)
The Financial Services Authority (FSA) was formally established in the United Kingdom by the Financial Services and Markets Act 2000. Originally established in 1985 as the Securities Investment Board, the agency adopted the Financial Services Authority name in 1997 until it was dissolved in 2013.
FSA was responsible for regulating banks, financial advisors and insurance companies and intermediaries as well as entities engaged in the mortgage business. The Financial Services and Markets Act laid out four primary objectives for the FSA, including encouraging market confidence in the U.K. financial system, protection, and enhancement of the financial stability of the U.K. financial system, securing adequate consumer protections and reducing the incidence and impact of financial crime. These objectives were supported through a codified set of principles of good regulation.
Additionally, FSA enhanced its responsibilities to the financial and consumer sectors in the U.K. by pursuing transparency in ways the agency determined policy and carried out general functions, and by providing political, public and legal accountability. To this end, FSA operations were overseen and scrutinized by the Treasury and Parliamentary Committees, and the agency required that annual reports include performance assessments towards fulfilling their principles.
Dissolution of the FSA
In the aftermath of the financial crisis of 2008, government officials decided to revise the regulatory structure of financial in the U.K, passing the Financial Service Act 2012 and dissolving the FSA beginning in April 2013. In order to continue with the financial regulation needs, two new agencies were created: the Financial Conduct Authority and the Prudential Regulation Authority of the Bank of England.
The Financial Conduct Authority was established to regulate financial markets, providing protection for consumers and encouraging market integrity in the U.K. financial system, and facilitating competition in order to better serve the interests of consumers. An independent public body, the Financial Conduct Authority is funded by fees from the 58,000 firms the agency regulates.
The Prudential Regulation Authority’s responsibilities include the regulation of banks, credit unions, insurance firms, and investment firms. The Prudential Regulation Authority is an independent company wholly owned by the Bank of England, which in turn is owned by the government of the U.K. and is governed by Parliament. The decision-making body for the Prudential Regulation Authority is the Prudential Regulation Committee, comprised of several members, including the Governor of the Bank of England; the Chief Executive of the Financial Conduct Authority; the Deputy Governor for Financial Stability; the Deputy Governor of Markets and Banking, and the Deputy Governor of Prudential Regulation; a member appointed by the Governor with the Chancellor’s approval; and six additional members appointed by the Chancellor.