Financial Services Act
Following debates by the House of Lords on the proposed amendments to the Bank of England and Financial Services Bill, all of the House of Commons’ proposed amendments were accepted, resulting in the Bill subsequently being granted royal assent, on 4 May 2016.
The Bank of England and Financial Services Act 2016 (the Act) will assist the Bank of England (the Bank) to oversee the UK’s monetary policy and financial stability. It includes the following measures:
- Strengthen co-ordination arrangements between the Treasury and the Bank in protecting taxpayers and the wider economy from bank failures
- Extend the Senior Managers and Certification Regime to all financial services firms and introduce a ‘duty of responsibility’ for senior managers in all authorised firms superseding the reverse burden of proof which would have applied in the banking sector.
- Make changes to the Financial Policy Committee to make it a statutory committee of the Bank.
- Strengthening the governance and accountability of the Bank by ending the subsidiary status of the Prudential Regulation Authority and allowing the National Audit Office to undertake value for money reviews of the Bank for the first time.
- Support the government’s aims to have a robust and proportionate anti-money laundering and counter-terrorist financing regime.
The Act specifies that sections 31, 37 and 39 to 42 came into force on 4 May 2016. Apart from these provisions that have a commencement date specified in the Act, the other provisions of the Act will come into force (or have come into force) on a day or days to be appointed in commencement orders. It is expected that the provisions relating to the Senior Managers and Certification Regime being applicable across all financial sectors are due to come into force in 2018.
The Act is the third significant piece of legislation to impact the UK’s financial sector, the first being the Financial Services Act 2012, which placed the Bank at the centre of financial regulation and the second being the Banking Reform Act 2013, which implemented a number of banking standards regarding individual accountability and ring-fencing.