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Ross Cranston, Emilios Avgouleas, Kristin van Zweiten, Theodor van Sante, and Christoper Hare

This chapter discusses banking supervision in practice. It focuses on two jurisdictions: the UK and the European Banking Union (EBU), and considers in particular the type of powers enjoyed by the UK and EBU regulators, and the way they exercise them in their supervisory approaches. In the process the chapter highlights loopholes in the respective regimes and to some extent evaluates their effectiveness. On 1 April 2013 the Financial Services Act 2012 came into force, removing the Financial Services Authority and delivering a new regulatory structure for the UK, which comprises the Prudential Regulation Authority responsible for microprudential regulation and supervision of banks, building societies, and investment firms; and the Financial Conduct Authority, in addition to a financial stability (macroprudential) body within the Bank of England, the Financial Policy Committee. The EBU brought about the centralization of bank supervision and resolution within the Eurozone. The trigger for the establishment of the EBU was the Eurozone debt crisis.


This chapter addresses the UK bank supervision and regulatory architecture. Although banking business has existed in England since the seventeenth century, banks enjoyed no formal system of regulation until the introduction of the Banking Act of 1979. Over the years, the scope and intensity of regulation increased. After the global financial crisis, further changes were made to bank regulation as well as the regulatory architecture in the UK for bank regulation. The regulatory architecture introduced in April 2013 is characterised as ‘twin peaks’, that is, having two main agencies that are responsible for different regulatory objectives. The Prudential Regulation Authority (PRA) is responsible for ‘prudential’ objectives—that is, the solvency and financial soundness of financial institutions—while the Financial Conduct Authority (FCA) is responsible for conduct of business and market regulation, including promoting competition. The PRA and FCA enjoy a wide berth of rule-making and enforcement powers.