Fitch Reviews UK Banking Regulations

by Robin Pilgrim, LawAndTax-News.com, London

17 April 2006

Delivering its update on the UK's regulatory system on Wednesday, Fitch Ratings stated that the presence of the Financial Services Authority has helped to enforce good banking prudential regulations, although there remain challenges to further improve transparency and efficiency.

Fitch revealed that it considers the UK prudential framework to be reasonably solid, efficient and transparent. The agency also noted that since the establishment of the FSA as a single integrated financial regulator, it has built up an international reputation for being competent and rigorous.

In Fitch's view, good prudential regulations enforced by a powerful regulator, like the FSA, are positive from a bondholder's perspective.

The ratings agency announced that:

"The move to a single regulator has helped to improve coordination of regulation between banking, insurance and securities supervisors. However, four years since its creation, there are still many challenges. Staff quality and continuity are difficult to maintain in a highly innovative and technical industry; both are key to the quality of the FSA's prudential supervision."

"Other challenges include the balancing of the FSA's wide objectives, particularly market confidence and consumer protection, and improving the handbook of rules to make them clearer and more accessible."

This report described the UK regulatory framework with regard to capital adequacy, asset quality, liquidity, consolidated supervision, money laundering, and corporate governance.

It also contained an overview of UK banking prudential supervision.

Recommended