Uk Regulatory Infastructure

Question 1

Define regulation

Answer 1

A rule made and maintained by an authority

Question 2

Cons of state market interference?

Answer 2

-Increased costs
-Distorts natural market

Question 3

Cons of no regulation?

Answer 3

-Negative externalities eg pollution
-favour larger businesses with more knowledge
-financial crime

Question 4

Pros of regulation?

Answer 4

-Preventing monopolies
-Preventing undesirable outcomes

Question 5

What does FSA stand for?

Answer 5

Financial service authority

Question 6

What does PRA stand for?

Answer 6

Prudential regulation authority

Question 7

What does FPC stand for?

Answer 7

Financial policy committee

Question 8

What replaced the FSA in 2012?

Answer 8

FCA, PRA, FPC

Question 9

What does the FCA do?

Answer 9

-ensure a “sound, stable and resilient” financial system
-responsible for how a business conducts its business
-ensure fair and efficient markets

Question 10

What is rules-based regulation?

Answer 10

-letter of the law rather than spirit of the law

Question 11

Pros of a rules based approach?

Answer 11

• objective
  -easy to interpret and follow

Question 12

Cons of a rules based approach?

Answer 12

-rigid
-some rules may be pointless or crude

Question 13

What is a principles based approach?

Answer 13

-subjective
-outcome focused

Question 14

Pros of a principles based approach?

Answer 14

-more adaptable

Question 15

Cons of principle based regulation?

Answer 15

-inconsistent
-difficult to enforce

Question 16

What does the PRA do?

Answer 16

-focuses on issues that pose the greatest risk to the financial system
-responsible for prudential regulation
-promotes safety and soundness of firms