This paper reviews developments over the last three and a half years in the UK in an attempt to measure the performance of the Financial Services Authority (FSA) against the rationale for creating it in the first place. The paper provides an updated description of the UK institutional arrangements for financial regulation; examines the extent to which the FSA has achieved economies of scale and scope; describes how the FSA has developed a risk-based and cross-sector approach to regulation; and explains how, in the UK, the FSA works collectively with the Bank of England and the Treasury to maintain financial stability.
There is no single model of the institutional structure of financial regulation that is optimal for all countries in all circumstances. And it is too early to draw unqualified conclusions about the performance of the FSA in delivering the benefits expected from a single national financial services regulator. The FSA is only three and a half years old, and the new legislation has only just come into force. However, a promising start has been made in responding to market developments; in achieving economies of scale and scope; in creating a unified approach to standard-setting, authorisation, supervision, enforcement and consumer education; in introducing risk-based regulation on a consistent basis across firms and markets; and in working with the Bank of England and the Treasury to maintain financial stability.
