| Basel III | 2010 amendment to the 1988 set of international capital standards developed by the Basel Committee on Banking Supervision. Basel III is a set of reform measures designed to strengthen the regulation, supervision and risk management of the banking sector by improving resilience, transparency, governance and risk management.
|
| capital (adequacy) requirements / capital rations
| Levels of capital that institutions must hold to comply with regulations. These requirements are designed to help deal with unexpected losses.
|
| Capital Requirements Directive (CRD)
| A European Union directive which implements the Basel agreements on banking supervision.
|
| College of regulators |
International forum of the various national regulators of an individual cross-border financial institution
|
| Competition Commission (CC)
| Independent Public Body which conducts in-depth inquiries (following a reference made by another authority, most often the OFT) into mergers, markets and the regulation of the major regulated industries, with the aim of ensuring healthy competition.
|
| Counter-cyclical capital buffer
| Instrument through which regulators may require banks to hold additional capital during periods of prosperity, in order to slow the growth of credit and also to provide a reserve that can absorb losses in times of difficulty.
|
| Court (of Directors) |
The entity that governs the Bank of England, consisting of the Governor, two Deputy Governors and nine non-executive directors drawn mostly from business.
|
| Dodd-Frank Act | Common name for the Wall Street Reform and Consumer Protection Act 2010, a United States Act which aimed to promote financial stability and address the 'too big to fail' problem in the US financial sector.
|
| dual-regulated firms |
Firms that, under the draft Bill, would be subject to micro-prudential regulation by the PRA (because they are deemed to be of systemic importance) and conduct of business regulation by the FCA.
|
| European Banking Authority (EBA)
| European supervisory authority acting as a 'hub and spoke network' of EU and national bodies safeguarding public values such as the stability of the financial system, the transparency of markets and financial products and the protection of depositors and investors.
|
| European Insurance and Occupational Pensions Authority (EIOPA)
| European supervisory authority with specific responsibility for protecting insurance policy holders, pension scheme members and beneficiaries.
|
| European Securities and Markets Authority (ESMA)
| European supervisory authority responsible for the transparency and functioning of securities markets.
|
| European Supervisory Authorities (ESAs)
| Three European authorities responsible for the regulation of financial services in Europe. Specifically, working to create a single EU rule book and issuing guidance and recommendations to national regulators and firms. The three ESAs are the European Securities and Markets Authority (ESMA), the European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA).
|
| European Systemic Risk Board (ESRB)
| European body with a mandate to oversee risk in the financial system as a whole, with the power to issue warnings and recommendations.
|
| Financial Conduct Authority (FCA)
| New body proposed by the draft Bill, to be responsible for the regulation of conduct of business.
|
| Financial Policy Committee (FPC)
| New body proposed by the draft Bill, to be based within the Bank of England, with responsibility for macro-prudential regulation.
|
| Financial Services Authority (FSA)
| Independent non-governmental body, established by the Financial Services and Markets Act 2000, currently responsible for regulating the United Kingdom financial industry.
|
| Financial Services Compensation Scheme (FSCS)
| Scheme providing compensation to customers of UK-regulated deposit-takers in the event that the institution is no longer able to meet its own claims. Under the scheme, retail deposits receive compensation up to £85,000.
|
| Financial Stability Board (FSB)
| Organisation set up to coordinate at the international level the work of national financial authorities and international standard setting bodies.
|
| Independent Commission on Banking (ICB)
| Commission, chaired by Sir John Vickers, established by the Government in June 2010 to consider structural and related non-structural reforms to the UK banking sector to promote financial stability and competition. The Commission published its final Report on 12 September 2011.
|
| leverage | A firm's ratio of assets to equity (or another measure of capital)
|
| macro-prudential regulation
| Regulation that aims to ensure the stability of the banking and financial system as a whole.
|
| Market investigation reference (MIR)
| Procedure whereby the OFT refers a market directly to the Competition Commission, on the basis of suspicions that market features are preventing, restricting or distorting competition.
|
| micro-prudential regulation
| Regulation that aims to ensure the health and stability of individual financial institutions.
|
| Monetary Policy Committee (MPC)
| Committee within the Bank of England composed of nine members (five from within the Bank and four external members) with responsibility for setting interest rates.
|
| Office of Fair Trading (OFT)
| A non-ministerial government department and the UK's consumer and competition authority, responsible for enforcing consumer protection legislation, and also competition law under the Competition Act 1998.
|
| Payment protection insurance (PPI)
| Payment protection insurance covers loans or debt repayments in the event of problems such as inability to work due to illness or redundancy.
|
| proportionality principle
| The regulatory principle, set out in Clause 3B of the draft Bill, that "a burden or restriction that is imposed on a person, or on the carrying on of an activity, should be proportionate to the benefits, considered in general terms, which are expected to result from the imposition of that burden or restriction".
|
| Prudential Regulation Authority (PRA)
| New body proposed by the draft Bill, under the auspices of the Bank of England, with responsibility for ensuring the "safety and soundness" of systemically-significant financial institutions.
|
| Resolution | The process whereby the authorities seek to manage the failure of an institution in a safe and orderly way
|
| retail banking | the provision of services to individuals and small / medium sized businesses, largely deposit-taking, payment services and lending.
|
| ring-fencing | The isolation of certain banking services in an independently capitalised entity. The Independent Commission on Banking recommended a retail ring-fence to isolate certain retail banking services.
|
| shadow banking | Term covering a broad range of institutions that are not banks in themselves but which conduct banking activities. Hedge funds and securities dealers could fall into this category.
|
| Solvency II | A review of the capital adequacy regime for the European insurance industry. It aims to establish a revised set of EU-wide capital requirements and risk management standards that will replace the current solvency requirements.
|
| Special resolution regime (SRR)
| The Special Resolution Regime (SRR) sets out a permanent framework providing tools for dealing with distressed banks and building societies. It was introduced by the Banking Act 2009.
|
| sunset clause | Clause in legislation setting an expiry date for a particular provision, designed to prevent the continuation in statute of unnecessary or (in hindsight) undesirable provisions.
|
| super-complaint | Complaint made to the Office of Fair Trading by a designated consumer body, where a feature, or combination of features, of a market appears to be significantly harming the interests of consumers. The OFT has a duty to respond to a super-complaint within 90 days.
|
| systemic risk | The risk of significant disruption to the financial system as a whole.
|
| Tribunal | Specialist judicial body with responsibility for deciding disputes in particular areas of law.
|
| tripartite system | Current UK regulatory system under which three authorities—the Bank of England, the Financial Services Authority and the Treasury—are collectively responsible for financial stability, with financial regulation resting with the FSA.
|
| twin peaks | Financial regulation model under which prudential regulation and conduct of business regulation are carried out by different bodies.
|
| Vickers Commission |
The Independent Commission on Banking (see above)
|
