ENSURING FIRMS CONTINUE TO MEET OUR STANDARDS
Protecting client money and assets
Our responsibility for client money and asset regulation will cover all the firms we regulate, even those whose prudential supervision is led by the PRA.
We will continue to work with others here and in the EU to strengthen the regulatory framework for the protection of client assets, so people know that they are protected when they entrust money or assets to a firm. We will assess compliance in our supervision of firms, and base all of our work on robust risk analysis and better quality data.
We will also want to have a satisfactory wind-down plan from the firm.
For CP2 firms we will undertake very limited going-concern supervision and will only undertake a review of ICAAPs and ILAAs, if they are MiFID investment firms subject to the CRD. Most of our supervisory focus will be on satisfying ourselves that the wind-down plan is achievable and that the firm holds a minimum level of financial resources to fund an orderly wind-down.
For CP3 firms, we will be monitoring firms against minimum requirements and only stepping up supervision when a firm is close to failure or failing.
The tools that may be available to us in the event of insolvency are:
• Normal administration – this will be used for failures in most smaller firms which do not hold client assets.
• Special Resolution Regime (SRR) – this is currently only available for banks but, subject to consultation, the Treasury is proposing to widen it to cover investment firms (and other bodies). This would mean that we could, if an investment firm failed to meet threshold conditions, ask the Bank of England (as the resolution authority) to conduct a joint impact assessment and operate the SRR to resolve a firm – providing it meets the tests of the SRR.
• Special Administration Regime (SAR) – this can be used for investment firms that hold client assets, and is likely to be our preferred tool for these firms. We will consider, with the Treasury, whether the applicability of the SAR could be widened beyond investment firms when it is reviewed in due course.
European and global context
We intend to continue to actively play our part in shaping EU and global financial services conduct and markets regulation. We will share information and support cross-border supervision in international supervisory colleges for large multi-national financial institutions, and coordinate with the PRA and others in our engagement with the European Supervisory Authorities and other European and international bodies.
Dual regulation
The draft Memorandum of Understanding (MoU) between the FCA and the PRA sets out the two key principles for supervisory cooperation and coordination for dual- regulated firms, namely that:
• Each regulator’s supervisory judgements will be based on all relevant information.
• Supervisory activity will not normally be conducted jointly.
We intend to continue to actively play our part in shaping EU and global financial services conduct and markets regulation.
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