By Zhang Chenghui & Song Yicheng, Research team on “Reconstruction of China’s Financial Supervision Framework”, Research Institute of Finance, DRC

Research Report No 28, 2016 (Total NO 4911) 2016-3-22

Abstract: The global financial crisis exposed the drawbacks of the tripartite model of financial regulation in the UK, whereas the supervision system of a nation cannot be established or improved beyond its financial market structure. Before the financial crisis, the lack of the concept of macro-prudential supervision was a common issue in many countries. The reform of British financial supervision across the board is actually a negation of the original supervision system. In analyzing the reform measures of British financial supervision system, this report draws the following enlightenments. One, the crux of restructuring British financial supervision lies in continuous reforms of the intrinsic drawbacks leading to crisis. Two, the British “double supervision” mode (i.e. the supervision is jointly implemented by the Financial Conduct Authority and the Prudential Regulation Authority) has strengthened conduct regulation over financial institutions, especially on systematically important institutions. Three, any changes relating to financial supervision regulation are strictly based on the characteristics of British finance market. The British financial market features a high degree of globalization of monetary market and bond market while stock market lags a little behind in this regard. It would be detrimental to financial performance if the British financial regulation reform is viewed without considering the above-mentioned fact or if the British advanced “double supervision” experience is rigidly imitated.

Key words: financial supervision, UK, FRC, PRA, FCA