The Financial Service Authority - Research Paper Example

Federal Services ity Federal Services ity According to Federal Services Authority (2011), over the last two years, the Financial Service Authority (FSA), the lone regulatory body of financial services in the United Kingdom has been in the spotlight for several reasons. The plethora of problems generated from the credit crisis that emerged during 2007-2010 presented stern challenges for the FSA which are prevailing even today. Some of the issues that have had a significant impact in derailing the regulation mechanism of FSA in recent times are those mainly concerned with Enforcement, Financial Frauds, Investment Banking and Savings.

The reckless banking during the credit crisis along with the subprime mortgage catastrophe gratified the problems resulting in augmented unemployment and contracting housing markets. Though the FSA did make efforts to tackle the setbacks, but the credit crisis proved out to be such a colossal and unpredictable one, that not only FSA, but regulatory bodies around the world were unable to calculate it. Currently, it is believed that the crisis has diluted, but its aftershocks might continue to create difficulties for FSA in the future.

Moreover, FSA’s splitting into PRA and FCA in coming times might bring unseen challenges which would need to be dealt with redefined regulatory framework and objectives, placing safeguard of the financial system as the highest priority. In my view, the most important issue for FSA currently is related to Enforcement. FSA has been criticized from a few quarters for having a weak enforcement program that enables frauds. The FSA needs to take strong measures to deal with it so that it is able to set a prime example.

The measures should include imposing penalties, prohibitions and fines, carrying out extensive inquiries, cooperating with other regulatory bodies to share information and going to court when matters intensify and become uncontrollable. There is no harm in seeking the route to the court for market abuse and inside dealing affairs, especially after FSA’s recent success in two such cases. The aim should be to exert pressure through legal means on the guilty party that violates rules or the provisions of the FSA.

In this manner, FSA would not only be able to strengthen its enforcement approach but also enhance its reputation in the market. Another issue of importance that FSA currently faces is regarding its policies with respect to regulations of banks, Investment banking and savings. The critiques argue that in the past few years, FSA has not been able to deal adequately with the wider banking structure and also the examining of larger and more intricate banks. It is also said that FSA’s capital requirements for banks are quite lenient.

In order to cope with this critical issue, I believe that as Financial Services Authority (2011) states, the current measure of forming three divisions of PBU is a very apt step to delegate responsibility and ensure focused work. The need of the hour is to carry out a rigorous and across the board scanning of existing banking regulations and devise fresh and strict regulations which rule out the possibility of unauthorized transactions and also ensure that banks do not conceal their savings. This would pave way for a smooth and sound financial system (Federal Services Authority, 2011).

References Financial Services Authority. (2011). Who we are. Available from: http://www.fsagraduates.com/who-we-are.aspx[Accessed 22/12/11] Financial Services Authority. (2011). FSA Brochure. Available from: http://www.fsagraduates.com/files/A5Bro2011.pdf [Accessed 22/12/11]