paul fisher : the financial regulation reform agenda – what has been achieved and how much is left to do? speech by mr paul fisher, executive director for supervisory risk specialists and regulatory operations of the bank of england and deputy head of the prudential regulation authority ( pra ), at richmond, the american international university, london, 30 september 2015. * * * it is now 8 years since the start of the great financial crisis, and 7 years since the collapse of lehman brothers and aig in the united states, followed by the bailing out of hbos and rbs in the uk. the consequences were not limited to the financial sector – the economic recession that followed in much of the developed world was both deep and prolonged. this naturally created an imperative for changes to the regulation of the financial system to prevent the same thing happening again in future. since i became deputy head of the prudential regulation authority ( the pra ) in june 2014, i have been asked a number of times to comment on how far the regulatory reform agenda has advanced. how close are we to ending “ too big to fail ”? how much more regulatory change can one expect? in this lecture i will try to bring together in an accessible, structured way, summaries of the most important reform initiatives that are in train – at least those that affect prudential supervision – i will try to set out what they are aiming to achieve and how much further there is to go. i will then reflect on how the regulatory jigsaw fits together and the key questions that are being asked of it. alongside the statutory financial policy committee in the bank of england ( the fpc ) and the financial conduct authority ( the fca ), the pra was brought into life on 1 april 2013, as part of a reshaping of the uk ’ s financial regulation landscape. the pra is the prudential regulator for deposit takers ( banks, building societies and credit unions ), insurers and major investment firms. it started with two objectives : ( i ) promoting the safety and soundness of its authorised firms and ( ii ) specifically for insurers, to contribute to the securing of an appropriate degree of protection for those who are or may become policyholders. a year later, an additional secondary objective was added : to, so far as is reasonably possible, act in a way which facilitates effective competition in the markets for services provided by praauthorised persons in carrying on regulated

regulatory system is not solely about the pra of course. those firms that are authorised and supervised by the pra are the banks, building societies, credit unions and major investment firms. those firms are also regulated by the fca for conduct matters. the remaining firms and persons within the regulatory perimeter of the financial system are then solo regulated by the fca for prudential matters as well as conduct. the pra and fca arrangement is an example of the modern “ twin peaks ” model for financial regulation, pioneered in australia in 1998, which separates out the prudential regulator – which covers the larger, more systemic firms – from the conduct regulator. that gives the latter a very long tail of small firms and financial advisors within its net. for comparison, the pra authorises bis central bankers ’ speeches some 1, 700 firms and groups and has a budget for some 1, 200 staff, plus support services from the wider bank of england. the fca regulates over 73, 000 firms and employs over 3, 000 staff. the fca has a strategic objective to ensure that the relevant markets for financial services function well. its formal operational objectives are to secure an appropriate degree of protection for consumers ; to protect and enhance the integrity of the uk financial system ; and to promote effective competition in the interests of consumers in relevant markets. it is obviously important that the fca and pra work closely together even though they have separate, differing objectives. perhaps the most crucial aspects joining us are ( i ) that all pra - authorised firms are dual regulated by the fca as well for conduct purposes ( ii ) that the fca has a primary objective to promote effective competition and the pra has a secondary objective to facilitate it, and ( iii ) the fca and pra depend on shared data to carry out their roles. the close co - operation of the pra and fca is built into the system in part through cross membership of boards. the ceo of the fca sits on the pra board ( and is an fpc member ex officio ). the ceo of the pra sits on the fca board ( and is also an fpc member ). the pra has a board because it is currently constituted as a formal subsidiary of the bank of england. it has been proposed that this arrangement changes so that the pra becomes an authority within the bank, and the pra board would become a new prudential regulation committee. these proposals are subject to