There’s often some confusion when it comes to financial regulation in the UK. If you’re dabbling in finances for the first time, it’s likely you’ve come across both the PRA and the FCA before. But what does either organisation do, and how might they help you when you’re managing your money?
Firstly, it’s worth noting that the PRA and FCA were both once part of the same entity – the FSA – which operated until 2013.
Let’s take a close look and see what the differences are between the UK PRA vs FCA.
What is the PRA?
PRA stands for The Prudential Regulation Authority, and as the name likely suggests, it is responsible for the regulation and supervision of the biggest financial entities within the country. These include banks, credit unions, building societies, investment firms (albeit the bigger ones), and insurers.
Essentially, the PRA helps to create policy that both regulates and supervises larger financial handlers working in the UK. The authority actually came about as a result of 2007’s financial crashes. This period led to a large amount of new red tape and regulations moving into effect to prevent such crises from happening ever again.
The PRA is essentially a key part of the Bank of England, and its primary focus is on ensuring the safety and soundness of financial firms, as well as the stability of the financial system as a whole.
It also has the power to supervise and intervene in their activities, too, to ensure that they are meeting regulatory standards and operating safely and soundly.
Crucially, the PRA safeguards the stability of the UK financial system – making sure that any companies that do handle money are doing so with safety and oversight.
What is the FCA?
As mentioned briefly, the FCA and PRA were once part of the same system, the PSA. However, the main role of the FCA, or Financial Conduct Authority, is to help businesses deliver fair financial services to British consumers.
Its focus is on ensuring that financial markets operate fairly and transparently and that consumers are treated fairly by financial firms.
The FCA does this by setting rules and standards for financial firms to follow, such as the conduct of business rules, disclosure requirements, and consumer protection regulations. The FCA is an independent body that operates alongside the PRA and independently from the UK government.
The FCA is also responsible for promoting competition in financial markets by removing barriers to entry and encouraging innovation. It aims to ensure that consumers have access to a variety of products and services that meet their needs, and that they are treated fairly by financial firms. It’s not always an easy task!
The FCA is massively depended upon by British consumers when it comes to financial fairness. In a financial system that is so complex and often so fraught as ours, a little confidence goes a long way. Without the FCA, investments, savings and major financial decisions would all be going ahead without any kind of cushion!
So – what’s the difference between the PRA and the FCA?
The most obvious difference between the PRA and the FCA is that one focuses on ensuring financial firms stay stable and legally operational – while the other keeps financiers from making decisions that may harm consumers.
Both the PRA and the FCA regulate and measure financial businesses that operate on the stock market – such as investment firms. For example, the PRA may ensure that a firm is following legal practices, while the FCA ensures they’re doing so in the best interests of their customers.
The PRA also has more ties than the FCA. The former is answerable via British Parliament, while the FCA is comparably independent. The PRA is also technically part of the Bank of England, and is therefore closely tied with the money flow throughout the country.
Above all, the PRA tends to make tougher decisions regarding financial business responsibilities. They may also intervene in problems and cases where they have significant clout with greater efficiency. This is both because of their links to Parliament, and that they can also apply sanctions to businesses that fail to comply with their standards.
The FCA is more of a watchdog that works in tandem with the PRA to protect innocent people using services across the UK. Both bodies work in the interest of ensuring fiscal products are offered legally and fairly – and in some cases, businesses may require dual regulation from both offices!
FAQs
What are the FCA’s conduct rules?
The FCA’s conduct rules outline what they expect from financial services and businesses they regulate. They expect firms to always act with integrity, skill, and care, and they’re open with regulators. Firms should also treat customers fairly and appeal to their needs and conduct themselves properly in the wider marketplace.
Can the PRA prosecute people?
The PRA has the power to impose fines or sanctions on businesses or outfits that fail to meet their standards. They can also apply public censures, and may even choose to bar certain people from working in regulated finance for life. That’s a lot of power – and it’s worth getting on their good side!
Who regulates banks in the UK?
Officially, the FCA regulates banks within the UK, working in tandem with the Treasury. Regulation through the FCA entails making sure firms are protecting everyday consumers and that competition is healthy between rival firms – and that no one has an unfair advantage
Are the FCA’s rules ever legally binding?
In many cases, yes, the FCA can apply rules to firms that are bound within legal frameworks in the UK. The FCA states that the vast majority of its rulings may be viewed in such a way. This means that the regulator has the power to seek damages action as well as enforce other forms of legal action depending on case severity.