Q&A Session: Harvey Knight Interview
The financial sector in the UK has undergone a significant transformation since the 2008 financial crisis, with a heightened focus on both corporate and individual accountability as part of broader financial stability reforms and market integrity efforts.
One of the key developments has been the creation of the Financial Policy Committee (FPC) within the Bank of England, established to oversee macroprudential regulation and maintain financial stability. The FPC has broad powers to direct regulators like the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA), and uses tools like the countercyclical capital buffer to manage systemic risks.
Another significant shift has been a sharper focus on risk assessment and resilience, including stress testing and frameworks to ensure orderly failure management of large institutions. The Bank of England’s Resolvability Assessment Framework is an example of such efforts, aiming to contain the contagion effects of banking failures and protect the wider economy.
Enhanced conduct regulation and market transparency reforms have also been introduced to target misconduct, poor governance, and opaque practices. For instance, more robust rules on procurement exclude companies convicted of fraud or bribery from public contracts, raising corporate accountability standards in government dealings.
The post-crisis regulatory evolution has also seen the introduction of individual accountability rules, such as the Senior Managers and Certification Regime (SM&CR), which hold senior individuals personally responsible for misconduct and failures within their institutions.
Harvey Knight, the head of the UK Financial Services Regulatory team at Withers, a private client law firm, played a significant role in this regulatory evolution. Knight worked in-house for the Financial Services Authority between 2001 and 2007, advising on the legislation team that was doing pre-N2 case transition. Since then, Knight has been advising clients on navigating UK regulatory matters and enforcement investigations, primarily involving the FCA and PRA.
However, the UK's regulatory system is not without its challenges. There's confusion around whether it's the PRA or the FCA that should handle conduct regulation, and there are differences in their approaches. The system's complexity, with its overlapping multi-regulatory structure, raises questions about whether it is fit for purpose.
Moreover, the post-GFC response has been criticized for damaging the City's competitiveness due to regulators' obsession with regulatory risk. The consequences of regulatory failure can be career ending, and it has become a stick to beat everybody regardless of gender, race, or creed.
Despite these challenges, the evolution of financial regulation in the UK since 2008 reflects a paradigm shift from a lighter touch to a more intrusive, system-wide supervisory model with clear legal ramifications for both institutions and individuals. This shift aims to bolster financial system resilience, prevent misconduct, and mitigate future crisis risks.
References:
- Financial Conduct Authority. (n.d.). History of the FCA. Retrieved from https://www.fca.org.uk/about/who-we-are/our-history
- Financial Stability Board. (2011). Key Attributes of Effective Resolution Regimes for Financial Institutions. Retrieved from https://www.fsb.org/2011/10/key-attributes-of-effective-resolution-regimes-for-financial-institutions/
- Financial Services Authority. (2004). The Twin Peaks Model of Regulation. Retrieved from https://www.fca.org.uk/publication/policy/twin-peaks-model-regulation.pdf
- Bank of England. (2013). Resolvability Assessment Framework. Retrieved from https://www.bankofengland.co.uk/prudential-regulation/resolution/resolvability-assessment-framework
- Cabinet Office. (2017). Procurement Policy Note 06/17: Fraud, Bribery and Corruption. Retrieved from https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/595813/PPN_06_17_Fraud_Bribery_and_Corruption.pdf
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