Redrawing the regulatory map: A proposal for reform
| Pages | 49-58 |
| Published date | 01 January 1997 |
| Date | 01 January 1997 |
| DOI | https://doi.org/10.1108/eb024904 |
| Author | Michael Taylor |
| Subject Matter | Accounting & finance |
Journal of Financial Regulation and Compliance Volume 5 Number 1
Redrawing the regulatory map:
A
proposal
for
reform
Dr Michael Taylor
Received: 23rd October, 1996
London Guildhall University, 84 Moorgate, London EC2M 6SQ; tel: 0171 320 1000.
Dr Michael Taylor
has
most recently been
responsible
for
setting
up the
Masters pro-
gramme
in
Financial Services Regulation
at
London Guildhall University. Previously
he
worked
on
supervisory policy
at the
Bank
of
England, which
he
also represented on
a
Bank
for International Settlements working party
examining
the
public disclosure
of
firms'
deri-
vatives risks (the 'Fisher Group').
Dr
Taylor has
written extensively on
the
field
of
financial
ser-
vices regulation, including
two
papers 'Twin
Peaks:
A
regulatory structure
for the new
cen-
tury'
and
'Peak Practice:
How to
reform
the
UK's regulatory system', both published
by the
Centre
for
the Study
of
Financial Innovation.
ABSTRACT
In this paper
Dr
Taylor outlines
his
proposals
for
a
radical shake-up
of the UK's
system
for
regulating financial services. Market develop-
ments over
the
last decade mean that
the
exist-
ing boundaries between regulators, which
are
based
on the
traditional distinctions between
banking, securities,
and
insurance business,
are
no longer appropriate.
Instead,
the
regulatory
system needs
to be
configured around
two
gov-
ernment Commissions, pursuing
the
objectives
of financial stability
and
consumer protection
respectively.
INTRODUCTION
1996 marks
the
tenth anniversary
of
the Finan-
cial Services
Act. It has
witnessed
the
intensifi-
cation
of a
long-running debate about
the
future
of
financial services regulation
in the
UK.
As a
radical option
for
change,
the so-
called 'Twin Peaks' approach
has
attracted
considerable attention.
It
proposes
the
consoli-
dation
of
the present multiplicity
of
regulatory
bodies into just
two
commissions,
a
Financial
Stability Commission
and a
Consumer Protec-
tion Commission, pursuing
the
objectives
of
systemic
and
consumer protection respectively.
This paper outlines
the
main features
of the
Twin Peaks model which
has
been expounded
in
the
authors'
two
related papers
for the
Centre
for the
Study
of
Financial Innovation.
The present regulatory debate
in the UK is
being driven almost entirely
by the
alleged
shortcomings
of
retail regulation. Scandals
like pensions mis-selling
or,
more recently,
those affecting
the
unit trust sector have
damaged public confidence
in
retail financial
services, leading
to a
problem
of
under provi-
sion which policymakers rightly view with
concern. Moreover,
the
switch
to
greater reli-
ance
on
private providers
for
types
of
social
insurance which were once
the
preserve
of the
welfare state simply makes this problem more
acute
and may
also mean that without ade-
quate regulation
new
problems
on the
pensions
mis-selling model could
be
being stored
up for
the future. Against this background there
is a
growing body
of
opinion
in
favour
of
creating
a single statutory regulator
for
retail financial
services.
The danger
for the
financial services indus-
try
is
that
in
concentrating
on the
(genuine)
problems
of the
retail sector,
a
more funda-
mental issue
for the
future shape
of
regulation
stands
in
danger
of
being neglected.
The
Journal
of
Financial Regulation
and Compliance. Vol. 5, No.
1.
1997.
pp. 49-58
© Henry Stewart Publications.
1356-1988
Page 49
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