Regulatory Reform: The Shift Towards Twin Peaks

As the Financial Services Bill starts its journey through the parliamentary process, the FSA has moved to a twin peaks model. For insurers this is a marked change in the way firms are supervised.

One of the key aims of the Government's regulatory reform programme is to split the prudential and conduct regulation and supervision of banks, insurers and major investment firms. This will result in the Prudential Regulation Authority ("PRA"), a subsidiary of the Bank of England, having responsibility for prudential supervision of these firms; and the Financial Conduct Authority (essentially the FSA renamed), focusing on consumer protection and market regulation. This "twin peaks" model replaces the current tripartite structure where the FSA operates alongside the Treasury and the Bank of England, introduced by the Financial Services and Markets Act 2000 ("FSMA").