Do the rules vary depending on the size or complexity of the banking institution? Capital requirements apply to trading and non-trading portfolios. To calculate capital requirements in the off-trade portfolio, banks can follow the standardised approach or (subject to regulatory approvals) adopt the «internal ratings-based» approach. Under the standardised approach used by most small banks, assets benefit from a predetermined risk weighting according to the type of asset concerned. The trading book attracts a set of rules that cover: The regulatory and supervisory responsibility of UK banks is mainly shared between the Bank of England (in its capacity as Prudential Regulation Authority (PRA)) and the Financial Conduct Authority (FCA). The Bank of England carries out its PRA role through its Prudential Regulation Committee (PRC), while its Financial Policy Committee (FPC) has a macroprudential mandate to identify imbalances, risks and vulnerabilities in the UK financial system, and may instruct the PRA and FCA to take certain measures to mitigate these risks. The Bank of England also acts as the UK`s resolution authority for banks, construction companies and certain investment companies. As part of this process, the bank and the supervisory authorities concerned will assess whether the person is «fit and adequate» to perform this role. This assessment shall take into account, inter alia, the candidate`s professional experience and any issues related to his or her personal integrity. The RPA assumes that a bank`s turnaround plan and resolution preparation processes are subject to the oversight and approval of the board of directors or a senior management committee and will be reviewed by the audit committee.
Banks must appoint a Managing Director responsible for overall responsibility for the Bank`s recovery and resolution plan and for monitoring governance arrangements. As a bank comes under increasing pressure, the PRA will assess its «proximity to bankruptcy,» which is captured by the bank`s position in the PRA`s Proactive Intervention Framework (PIF), which is designed in part to guide the Bank of England`s contingency planning as a resolution authority. The assessment of the PIF results from a company`s ability to manage the following risks: There is some public oversight through the banking licensing system. [27] Under section 19 of the Financial Services and Markets Act, 2000, there is a «general prohibition» on engaging in a «regulated activity,» including accepting deposits from the public, without authorization. [28] The two main UK regulators are the Prudential Regulation Authority and the Financial Conduct Authority. Once a bank has been licensed in the UK or another Member State, it can operate throughout the EU in accordance with the rules of the host country: it has a «passport» that gives it the freedom of establishment in the internal market. In line with its discretionary prudential approach, the PRA`s supervisory approach focuses on the main risks to its statutory objectives. The PRA relies on a wide range of information and data to form prudential judgments and relies on banks – and other companies it regulates – to provide this information and data. At regular intervals, the PRA may validate the data through on-site inspections carried out either by its own supervisory staff or by third parties. To support their information gathering and analysis, the PRA requires companies to attend meetings with supervisory staff at senior and professional levels and expects them to be kept informed of any significant developments relevant to the supervisory situation of a UK bank or its group. This includes, for example, details of planned acquisitions, divestitures and significant intra-Group transactions. Under section 1 of the Bank of England Act 1998, the Bank`s executive body, the Court of Directors, is «appointed by Her Majesty», who is in fact the Prime Minister.
[7] These include the Governor of the Bank of England (currently Andrew Bailey) and a total of 14 Directors (there are currently 12, 9 men and 3 women[8]). [9] The governor may be in office for a maximum of 8 years, the deputy governor for a maximum of 10 years,[10] but they can only be removed from office if they hold political office, work for the bank, are absent for more than 3 months, go bankrupt or are «unable or unfit to perform his duties as a member». [11] This complicates removal and may constitute judicial review. A subcommittee of directors sets the remuneration of all directors[12] and not of a conflict-free organization such as Parliament. The Bank of England finances and supports private banks` interest rates through monetary policy and can influence them. Perhaps the most important function of the bank is the management of monetary policy. This has an impact on growth and employment. According to Article 11 of the 1998 Block Exemption Regulation, its objectives are (a) `to maintain price stability and (b) subject to that, to support the economic policies of Her Majesty`s Government, including its growth and employment objectives`. [13] Under section 12, the Department of Finance publishes annually its interpretation of «price stability» and «economic policy,» as well as an inflation target. To change inflation, the Bank of England has three main policy options. [14] First, it conducts «open market operations» by buying and selling bank bonds at different interest rates (i.e., Lending to banks at higher or lower interest rates, known as «discounts»), buying back government bonds («repo») or selling and lending them to banks at different interest rates. [15] This will affect the interest rate that banks charge by affecting the money supply in the economy (more central bank spending means more money and therefore lower interest rates), but it won`t either.
[16] Second, the Bank of England may require banks to hold different reserves above or below in proportion to their loans. [17] Third, the Bank of England could ask private banks to introduce specific deposit or lending policies for certain volumes or interest rates. [18] However, the Treasury is intended to place orders with the Bank of England only in «extreme economic circumstances». [19] This should ensure that monetary policy changes are neutral and that artificial booms are not manufactured before an election.
