An Overview of EU and UK Wholesale Market Regulators

What are global regulatory bodies?

• They set global policies and standard, which national regulators implement locally
• They have no formal rule-making power or supervisory authority

What are the four principal regulating bodies, and what are their roles?

(1). Financial Stability Board (FSB)

• Makes recommendations concerning the global financial system, with the aim of strengthening financial systems and increasing the stability of international financial markets
• Coordinates with national financial authorities from the G20 nations
• FSB policies are not legally binding, but it sets international agreed policies and minimum standards that its members commit to implement at national level
• FSB’s work covers a wide range of topics, from resolution planning to remuneration policies

(2). Basel Committee on Banking Supervision (BIS)

• The primary global standard setter for the prudential regulation of banks
• Its members comprise of central banks and bank supervisors from 28 jurisdictions
• Expects its members to implement standards in a full, timely and consistent manner, but they do not have legal force
• Basel III is an internationally agreed set of measures developed by the BCBS in response to the financial crisis of 2007-09

(3). International Organisation of Securities Commissions (IOSCO)

• Develops, implements and promotes adherence to internationally recognised standards for securities regulation
• IOSCO’s core standards are its Objectives and Principles of Securities Regulation, which set out 38 key principles
• IOSCO has 224 members, and together they regulate more than 95% of the world’s securities markets in over 115 different jurisdictions

(4). Financial Action Task Force (FATF)

• An inter-governmental body that sets out standards and promotes effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats
• The Task Force hs 37 member jurisdictions, which agree to implement the recommendations in their country
• The FATF monitors implementation by carrying out evaluations in member jurisdictions

Which financial service regulators in the EU have supervisory and enforcement powers?

• The three EU legislative bodies - comprising the European Commission, the Parliament, and the Council of the EU are responsible for making EU primary and secondary legislation.
• The three EU supervisory authorities (ESAs) - are responsible for consulting market participants and advising on the development of EU secondary legislation, and for developing Level 3 guidance materials, including guidelines and question and answer documents. The ESAs also oversee implementation of EU regulatory frameworks by the EU Member States, with the aim of promoting consistency and harmonisation

What is the role of ESMA, EBA and EIOPA?

1. European Securities and Markets Authority (ESMA) - is responsible for securities regulation and so plays a key role in relation to MiFID II and the Market Abuse Regulation
2. European Banking Authority (EBA) - is concerned with the bank prudential and governance regulation, and so the Capital Requirements Directive and Regulation will fall within its remit. The EBA also oversees payments and e-money regulation
3. European Insurance and Occupational Pensions Authority (EIOPA) - is responsible for insurance and pensions regulation, and much of its work release to the Solvency II framework. At times, the ESAs will work together as the Joint Committee of the ESAs

What is the role of the HM Treasury in the UK?

Responsible for developing financial services legislation in the UK, whether this be legislation to implement EU requirements, or standalone domestic legislation.

In the UK, who are the two key financial services regulators, and what are their roles?

(1). Prudential Regulation Authority (PRA)

• Regulates the largest and most systemically important financial services firms in terms of their regulatory capital and governance requirements.
• This includes banks, insurers, the largest investment firms, and firms who are prominent in the wholesale financial markets

(2). Financial Conduct Authority (FCA) 

• Regulates the same firms from a conduct of business perspective. This means ensuring that they meet certain requirements in terms of how they interact with clients and how they carry out their business
• The FCA also oversees financial crime compliance
• Regulates all other firms that are required to be authorised in the UK from a prudential and conduct business perspective
• Smaller wholesale firms will be regulated by the FCA only, not the PRA
• The FCA carries out a primary markets function, and is responsible for approving prospectuses and circulars, and for operating the UK listing regime