Banking regulation—United Kingdom—Q&A guide

The following Financial Services practice note provides comprehensive and up to date legal information covering:

  • Banking regulation—United Kingdom—Q&A guide
  • 1. What are the principal governmental and regulatory policies that govern the banking sector?
  • 2. What are the defining characteristics of a bank to be caught by the banking laws and regulations? Is non-bank fintech regulated differently?
  • 3. Do the rules vary depending on the size or complexity of the banking institution?
  • 4. Summarise the primary statutes and regulations that govern the banking industry.
  • 5. Which regulatory authorities are primarily responsible for overseeing banks?
  • 6. Describe the extent to which deposits are insured by the government. Describe the extent to which the government has taken an ownership interest in the banking sector and intends to maintain, increase or decrease that interest.
  • 7. Which legal and regulatory limitations apply to transactions between a bank and its affiliates? What constitutes an ‘affiliate’ for this purpose? Briefly describe the range of permissible and prohibited activities for financial institutions and whether there have been any changes to how those activities are classified.
  • 8. What are the principal regulatory challenges facing the banking industry?
  • 9. Are banks subject to consumer protection rules?
  • More...

Banking regulation—United Kingdom—Q&A guide

This Practice Note contains a jurisdiction-specific Q&A guide to banking regulation in United Kingdom published as part of the Lexology Getting the Deal Through series by Law Business Research (published: March 2022).

Authors: 1 Crown Office Row—Edite Ligere

1. What are the principal governmental and regulatory policies that govern the banking sector?

Two key regulators regulate the UK banking sector. The financial safety and soundness of banks is regulated for prudential purposes by the Prudential Regulation Authority (PRA), which is part of the Bank of England, the United Kingdom's central bank. The Financial Conduct Authority (FCA) regulates how banks conduct themselves within financial markets and with clients. The Financial Policy Committee (FPC), which operates from within the Bank of England, acts as the macroprudential regulator for the UK financial system. The legislative framework for UK bank authorisations is set out in the Financial Services and Markets Act 2000, as amended (FSMA 2000). The FSMA 2000 lists the statutory objectives of the PRA and the FCA.

The PRA's principal objective is to promote the safety and soundness of the firms that it regulates. The PRA has a three-pronged approach to regulation and supervision:

  1. a judgment-based approach;

  2. a forward-looking approach; and

  3. a key-risk-focused approach.

The purpose of these approaches is not to achieve zero failure within the banking system, but rather to ensure that when a financial firm

Popular documents