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The Trajectory of Regulatory Reform in the UK in the Wake of the Financial Crisis

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Abstract

There has been much talk about regulatory reform around the world in the wake of the financial crisis but relatively little action. As a major international financial centre, the UK is very much at the heart of the debate and has a particular interest in the ultimate outcome. The financial crisis has exposed the weaknesses of ‘light touch’ regulation and ‘principles-based’ regulation, which characterised the UK system in the pre-crisis phase. Changes to the institutional structure of regulation recently announced by the new coalition government, combined with changes to regulatory style, are likely to have far-reaching consequences for the practice and intensity of regulation in the UK. This article reviews and assesses recent and proposed regulatory changes and considers the relationship between corporate governance and regulation. It evaluates the impact on the UK system of initiatives undertaken at international and EC levels as well as various interests and incentives within the UK that are likely to be influential in shaping the regulatory regime in years to come.

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References

  1. For diagnosis of the causes of the crisis, see, e.g., President’s Working Group on Financial Markets, Policy Statement on Financial Markets Developments (March 2008), at: <http://www.ustreas.gov/press/releases/reports/pwgpolicystatemktturmoil_03122008.pdf>; FSA Financial Risk Outlook 2009 (February 2009), at: <http://www.fsa.gov.uk/Pages/Library/corporate/Outlook/fro_2009.shtml>; and the Report of the High-Level Group on Financial Supervision in the EU (the de Larosière Report, February 2009), at: <http://ec.europa.eu/intemal_market/finances/docs/de_larosiere_report_en.pdf>. All these official reports attribute a secondary role to regulatory failure, pointing instead to macroeconomic factors and financial market practices as the primary causes.

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  5. The Financial Services and Markets Act 2000 (FSMA 2000) and the Financial Services Act 2010.

  6. See FSA, Financial Risk Outlook 2009 (February 2009), citing the following as causal influences: a property price boom; increasing leverage in the banking and shadow banking system; rapid expansion of credit and falling credit standards; increasing complexity of the securitised credit model; and underestimation of bank and market liquidity risk. A similar trend was evident in the United States as none of the five causes of the financial crisis cited by the President’s Working Group on Financial Markets referred expressly to regulatory failure: see E. Pan, ‘Four Challenges to Financial Regulatory Reform’, at: <http://www.ssm.com/abstract=1521504>.

  7. FSA, The Turner Review, A Regulatory Response to the Global Banking Crisis (March 2009), at: <http://www.fsa.gov.uk/Pages/Library/Corporate/tumer/index.shtml>. The review was commissioned by the Chancellor of the Exchequer in October 2008 in terms that requested the Chairman of the FSA (Lord Turner) to review the causes of the crisis and make recommendations for change in regulation and supervision of banks.

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  20. The arrangement was established through a memorandum of understanding, which was revised in 2006, see: <http://www.fsa.gov.uk/pubs/mou/fsa_hmt_boe.pdf>.

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  22. See the Terms of Reference of the Council for Financial Stability, at: <http://www.hm-treasury.gov.uk/fm_council_financial_stability.htm>.

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  26. See FSMA 2000, sections 138 and 157.

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  30. In particular, the limited nature of the deposit guarantee scheme then in operation in the UK and the (perceived) restrictions imposed by the EC Market Abuse Directive (Directive 2003/6, OJ 2003 L 96/16) on the provision of covert support (with a view to avoiding the market stigma associated with access to ‘lender of last resort’ support provided by the Bank of England).

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  32. The options are: limiting the size of financial institutions; increasing capital requirements to a level that limits the possibility of failure; separating ‘utility banking’ from investment banking; improving systemic risk monitoring and supervision; and implementing effective resolution regimes to permit effective regulatory intervention in failing banks. See, generally, Greene, et al., supra n. 40; and Treasury Committee, Too Important to Fail — Too Important to Ignore (HC 261) (March 2010).

  33. See HM Treasury, supra n. 23, at paras. 5.29–5.38.

  34. But see infra in section 5.2, referring to ‘living wills’ as a partial solution.

  35. This defect was common to many systems: see, e.g., Basel Committee on Banking Supervision, Consultative Document. Report and Recommendations of the Cross-border Bank Resolution Group (September 2009), at: <http://www.asbaweb.org/Consulta-Reporte.pdf>; E. Hüpkes, ‘“Form Follows Function” — A New Architecture for Regulating and Resolving Global Financial Institutions’, 10 European Business Organization Law Review (2009) pp. 369–385.

  36. See The Run on the Rock, supra n. 9, at para. 197: ‘The Governor [of the Bank of England] pointed out that the UK authorities were alone in the G7 in being unable to deal with a distressed bank under a special resolution regime, relying instead on normal corporate insolvency laws.’

  37. For developments in cross-border crisis management, see the principles agreed by the Financial Stability Forum in March 2009, at: <http://www.financialstabilityboard.org/publications/r_0904c.pdf>.

  38. See The Run on the Rock, supra n. 9, at paras. 113–115.

  39. Under standard UK insolvency procedures the depositors would not be paid promptly even if they fell within the Financial Services Compensation Scheme under Part XV of the FSMA 2000.

  40. See FSA Discussion Paper 09/4, Turner Review Conference Discussion Paper (October 2009), Annex 1.

  41. See, generally, FSA Discussion Paper 09/4, supra n. 55, for further discussion of this issue.

  42. See The Turner Review, supra n. 7, at p. 86, referring to it as ‘somewhat of a caricature, and a term which the FSA never itself used’.

  43. FSA Regulatory Response, supra n. 8, at para. 11.14.

  44. See, e.g., ‘Seven Charged over Insider Trading Ring’, Financial Times, 31 March 2010.

  45. See, generally, I. MacNeil, ‘The Evolution of Regulatory Enforcement Action in the UK Capital Markets: A Case of “Less is More”’, 2 Capital Markets Law Journal (2007) p. 345.

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  46. See, generally, FSA, Principles-Based Regulation: Focusing on the Outcomes That Matter (2007), at: <http://www.fsa.gov.uk/pubs/other/principles.pdf>; and J. Black, ‘Making a Success of Principles-Based Regulation’, 1 Law and Financial Markets Review (2007) pp. 191–206.

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  47. See D. Kershaw, ‘Evading Enron: Taking Principles Too Seriously in Accounting Regulation’, 68 Modern Law Review (2005) pp. 594–625.

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  48. See C.L. Ford, ‘New Governance, Compliance and Principles-Based Securities Regulation’, at: <http://ssm.com/abstract=970130>. A cursory glance at the sheer scale of the FSA Handbook of Rules and Guidance (see: <http://www.fsa.gov.uk>) serves to illustrate the point.

  49. H. Sants, ‘Delivering Intensive Supervision and Credible Deterrence’, Speech at Reuters Newsmakers Event (12 March 2009), at: <http://www.fsa.gov.uk/pages/Library/Communication/Speeches/2009/0312_hs.shtml>.

  50. This analysis also attracted support from influential independent commentators: see Brunnermeier, et al., supra n. 4.

  51. The focus of macro-prudential regulation is not simply the banking or financial system but broader issues such as inflation, asset prices, competition in markets, monetary and fiscal policy: see Bank of England Discussion Paper, The Role of Macroprudential Policy (November 2009), at para. 5.4.

  52. The Turner Review, supra n. 7, at p. 61.

  53. Based on the FSA’s estimation of counter-cyclical reserves of 2 to 3% of risk-weighted assets at the top of the cycle (see FSA Regulatory Response, supra n. 8, at para. 5.31), capital requirements might have to rise by as much as 20% above current levels.

  54. See supra section 4 (institutional structure).

  55. See Bank of England, supra n. 68, at para. 6.1.

  56. For example, mortgage brokers and non-life insurance intermediaries were brought within the FSMA 2000 regulatory perimeter in 2008.

  57. The Turner Review, supra n. 7, at p. 70.

  58. The Turner Review, supra n. 7, at p. 70, noting that UK mutual funds did not act in this way.

  59. Regulatory arbitrage refers to the selection of different regulatory regimes to structure legal entities or transactions by reference to the overall compliance cost (implicit as well as explicit) of each regime. For general background, see V. Fleischer, ‘Regulatory Arbitrage’, University of Colorado Working Paper Number 10–11, at: <http://ssm.com/abstract=1567212>.

  60. The EC regime for bank capital (including the ‘trading book’ in which banks act as principal in trading financial instruments) is contained in the Capital Requirements Directive (itself a combination of the Banking Consolidation Directive 2006/48/EC, OJ2006 L 177/1 and the Capital Adequacy Directive 2006/49/EC, OJ 2006 L 177/201), which is implemented in the UK by the GENPRU and BIPRU blocks of the FSA Handbook.

  61. Recent revelations that have emerged from the report of the supervisor of the bankruptcy of Lehman Brothers (see ‘SEC Launches “Repo 105” Probe’, Financial Times, 30 March 2010) provide evidence of regulatory arbitrage — in Lehman’s case as between English law requirements for recognition of a valid ‘repo’ transaction and the accounting treatment of such a transaction in consolidated group accounts prepared under US GAAP — but do not alter the broader view that such regulatory arbitrage was not a major causal influence in the crisis.

  62. See Brunnermeier, et al., supra n. 4; MacNeil, infra n. 190; and Spitzer, supra n. 3.

  63. See IOSCO, Hedge Funds Oversight: Final Report (June 2009), at: <http://www.iosco.org/library/pubdocs/pdf/IOSCOPD288.pdf>.

  64. The Turner Review, supra n. 7, at pp. 72–73. The FSA’s Regulatory Response was similarly tentative, focusing on the benefits of indirect regulation of hedge funds through regulation of regulated entities (such as investment banks providing prime brokerage services) that have relationships with hedge funds: see FSA Regulatory Response, supra n. 8, at paras. 6.14–6.27.

  65. See COM (2009) 207 final.

  66. See ‘Brown Delays Hedge Fund Reform’, Financial Times, 16 March 2010. Following the change of government in the UK in early May, it subsequently became clear that the delay was no more than that, with the result that the UK is likely to have to accept stricter hedge fund regulation: see ‘Osborne Bows to EU Hedge Fund Rules’, Financial Times, 20 May 2010.

  67. See T. Möllers, ‘Regulating Credit Rating Agencies: The New US and EU Law — Important Steps or Much Ado about Nothing?’, 4 Capital Markets Law Journal (2009) pp. 477–501, for a comparison of the US and EU approaches.

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  68. While Art. 81 of the EC Capital Requirements Directive (2006/48, OJ 2006 L 177/1) required that credit ratings used in connection with the risk weighting of assets (for the purposes of the calculation of regulatory capital) be issued by a rating agency that was recognised as ‘eligible’ by at least a single Member State, this process did not amount to licensing or supervision in a form comparable to that imposed on banks, insurers and investment firms under the EC regulatory regime.

  69. FSA Regulatory Response, supra n. 8, at para. 1.57.

  70. FSA Regulatory Response, supra n. 8, at para. 1.56.

  71. See the Joint Forum (comprising the Basel Committee, the International Organisation of Securities Commissioners and the International Association of Insurance Supervisors), Differentiated Nature of Financial Regulation (January 2010), at p. 78, at: <http://www.bis.org/publ/joint24.pdf>.

  72. See F. Partnoy, ‘How and Why Credit Rating Agencies Are Not Like Other Gatekeepers’, at: <http://ssm.com/abstract=900257>.

  73. Regulation (EC) 1060/2009, OJ 2009 L 302/1.

  74. See Recital 10 of the Regulation.

  75. See IOSCO, Code of Conduct Fundamentals for Credit Rating Agencies, at: <http://www.iosco.org/library/pubdocs/pdf/IOSCOPD173.pdf>.

  76. The Committee of European Securities Regulators: see: <http://www.cesr-eu.org>.

  77. See Art. 6 and section E of Annex 1 to the Regulation.

  78. See Möllers, supra n. 88, at pp. 499–500.

  79. As regards the Basel regime, see The Core Principles for Effective Banking Supervision (1977), at: <http://www.bis.org/publ/bcbs30a.pdf>; and for the EC, the Capital Requirements Directive, supra n. 79.

  80. Art. 41, first sub-paragraph, of Directive 2006/48/EC provides that host Member States retain responsibility for the supervision of liquidity of branches of EC credit institutions, but only ‘pending further coordination’.

  81. For general background, see: <http://www.hm-treasury.gov.uk/landsbanki.htm> (30 April 2010). Passporting covers EEA member states such as Iceland.

  82. FSA Regulatory Response, supra n. 8, at p. 156. The reference to an ‘EU-wide framework’ seems to envisage rules and regulatory bodies operating at EC level rather than the current system of EC-produced rules implemented in different ways in different Member States. See also ibid., at p. 101, canvassing the twin options of ‘more Europe’ or ‘less Europe’; and The Turner Review, supra n. 7, at p. 102, supporting ‘more Europe’.

  83. See, e.g., the Commission working document published in connection with the public hearing on 26 April 2010 regarding changes to the Capital Requirements Directive, proposing (at para. 28) greater home state supervision over the liquidity of bank branches operating in other Member States, at: <http://ec.europa.eu/intemal_market/consultations/docs/2010/crd4/consultation_paper_en.pdf>.

  84. See FSA Discussion Paper 09/4, supra n. 55, at para. 3.54.

  85. See Brunnermeier, et al., supra n. 4, at para. 3.4 and chapter 7.

  86. See A. Persuad, Macro-Prudential Regulation (World Bank, Crisis Response, Note Number 6, July 2009), at: <http://rru.worldbank.org/documents/CrisisResponse/Note6.pdf>.

  87. See FSA Regulatory Response, supra n. 8, at paras. 6.7–6.13.

  88. See FSA Policy Statement 09/14, The Approved Persons Regime — Significant Influence Function Review (July 2009). Further refinement of the regime is proposed in FSA Consultation Paper 10/3, Effective Corporate Governance (Significant Influence Controlled Functions and the Walker Review) (January 2010).

  89. While the transaction reporting regime established by Art. 25 MiFID provides regulators with transaction details from the OTC market in respect of trading in financial instruments admitted to trading on regulated markets, there remains a substantial volume of OTC trade that is not in such instruments (e.g., credit default swaps).

  90. See FSA, Financial Risk Outlook 2010, at: <http://www.fsa.gov.uk/pubs/plan/financial_risk_outlook_2010.pdf>, at p. 22, for details of the recent evolution of UK banks’ capital adequacy ratios.

  91. See the Basel Committee’s Consultative Document Strengthening the Resilience of the Banking Sector (December 2009), at: <http://www.bis.org/publ/bcbs164.htm>.

  92. See ‘Differences Persist over Tougher Regime’, Financial Times, 26 April 2010, reporting on differences between the G20 members and within the IMF over the scale of the increase required and the techniques to be used.

  93. See the Basel Committee’s Enhancements to the Basel II Framework (July 2009), at: <http://www.bis.org/publ/bcbs157.htm>.

  94. The changes are contained in amendments to the Capital Requirements Directive, supra n. 79. For further details regarding the ongoing process, see: <http://ec.europa.eu/intemal_market/bank/regcapital/index_en.htm>. These standards take the EC beyond those of the Basel Committee guidelines and promote greater harmonisation within the EC.

  95. The changes will be made mainly through the FSA rulebook but changes to the institutional structure of regulation resulting from the EC proposals discussed in section 4 will be implemented in regulations made by the Treasury: see FSA Consultation Paper 09/29, Strengthening Capital Standards 3 (December 2009), at: <http://www.fsa.gov.uk/pubs/cp/cp09_29.pdf>; and HM Treasury, Implementing Amendments to the CRD (December 2009), at: <http://www.hm-treasury.gov.uk/d/consult_capital_requirements_directive.pdf>.

  96. FSA Consultation Paper 09/29, supra n. 124.

  97. Reflecting the shift in regulatory dynamics in support of regulatory intervention, the FSA Chairman has recently proposed that the FSA consider adopting a system of sectoral risk-weighting of banks’ assets with a view to limiting rapid increases in bank lending to specific sectors, such as occurred in relation to (largely speculative) construction in the years prior to 2007: see ‘Turner Calls for Powers to Control Asset Bubbles’, Financial Times, 17 March 2010. The power to adopt such measures is already vested in the FSA, but exercise of this power would represent a change in regulatory philosophy towards a much more interventionist stance.

  98. Note, however, that the Committee of European Banking Supervisors (CEBS) did issue recommendations in December 2009 on liquidity buffers and survival periods: see: <http://www.c-ebs.org/Publications/Standards-Guidelines.aspx>. This followed the publication in September 2008 of the Basel Committee’s (revised) Principles for Sound Risk Management and Supervision.

  99. The regime will apply to all ‘BIPRU’ firms, including UK banks, investment firms and building societies as well as UK branches of EEA and non-EEA banks.

  100. See G. Walker, ‘Liquidity Risk Management — Policy Conflict and Correction’, 4 Capital Markets Law Journal (2009) p. 451.

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  102. E. Avgouleas, ‘What Future for Disclosure As a Regulatory Technique? Lessons from Behavioural Decision Theory and the Global Financial Crisis’, in MacNeil and O’Brien, eds., supra n. 24, p. 231.

  103. Steven L. Schwarcz, ‘Disclosure’s Failure in the Subprime Mortgage Crisis’, Utah Law Review (2008) p. 1109, and Duke Law School Legal Studies Paper No. 203, at: <http://ssm.com/abstract=1113034>.

  104. The Turner Review, supra n. 7, at p. 42.

  105. In retail financial markets there has already been evidence pre-crisis of a reduced role for disclosure in both the EC and UK regimes: see N. Moloney, How to Protect Investors (Cambridge University Pres 2009), chapter 5.

  106. This impression is borne out by the FSA’s subsequent Discussion Paper 09/5 Enhancing Financial Reporting Disclosures by UK Credit Institutions (October 2009), which focused on improving comparability of disclosures between credit institutions and reducing complexity.

  107. FSA Regulatory Response, at pp. 172–175.

  108. The Markets in Financial Instruments Directive, 2004/39/EC OJ 2004 L 145/1.

  109. This was a review undertaken for the purposes of providing advice to the Commission in connection with the report on pre-and post-trade transparency required by Art. 65(1) MiFID: for background, see the DG Internal Market and Services Working Document (April 2008), at: <http://ec.europa.eu/intemal_market/securities/docs/isd/nemt_report_en.pdf>.

  110. See CESR/09-348 (10 July 2009), recommending that the 2010 Commission revision of MiFID extend post-trade transparency to bonds for which a prospectus has been published or which have been admitted to trading on a multilateral trading facility. This measure was seen to have the potential to restore market confidence (by limiting asymmetry of information regarding trading prices and volumes in the absence of a post-trade reporting regime) and improve liquidity in normal times.

  111. See, e.g., IOSCO, Transparency of Structured Finance Products (September 2009), at: <http://www.iosco.org/library/pubdocs/pdf/IOSCOPD306.pdf>.

  112. This extension occurred in June 2009 in the UK through changes to the FSA Handbook: see Disclosure Rules and Transparency Rules 5.1 (Notification of the acquisition or disposal of major shareholdings) extending ownership notification requirements to financial instruments that are equivalent in economic terms to voting shares. At the EC level, the CESR has proposed an EC-wide regime for such instruments, which currently fall outside the disclosure requirements of the Transparency Obligations Directive: see CESR /09-1215b (January 2010).

  113. See also IOSCO consultation paper, supra n. 144, recommending greater post-trade transparency for structured finance products.

  114. See the CESR/ESCB consultation on clearing, settlement and central counterparty systems, at: <http://www.cesr-eu.org/index.php?page=contenu_search_res&searchkeyword=clearing&exactphrase=on&doconly=all&searchdatefromday=1&searchdatefrommonth=1&searchdatefromyear=2005&searchdatetoday=27&searchdatetomonth=5&searchdatetoyear=2010&x=54&y=18>.

  115. The measures took effect on 18 September 2008: see FSA Consultation Paper 09/1, Temporary Short Selling Measures.

  116. See FSA Consultation Paper 09/15, Extension of the Short Selling Disclosure Obligation (June 2009), at: <http://www.fsa.gov.uk/pages/Library/Policy/CP/2009/09_15.shtml>.

  117. See section 8 of the Act.

  118. See CESR, Model for a Pan-European Short Selling Disclosure Regime, CESR/10-088. In the meantime, the temporary measures adopted by the German authorities illustrate the divergence of approach within the EU: see: <http://www.bafin.de/cln_179/nn_720486/SharedDocs/Artikel/EN/Service/Meldungen/meldung__100518__cds__leerverkaufsverbot__allgemeinverfuegungen__en.html?__nnn=true>.

  119. See J. Symington (Head of Wholesale Department, FSA), ‘The FSA and Enforcing the Market Abuse Regime’ (November 2008), at: <http://www.fsa.gov.uk/pages/Library/Communication/Speeches/2008/1106_js.shtml>, referring to credible deterrence and the role of criminal prosecutions; and ‘Seven Charged over Insider Trading Ring’, Financial Times, 31 March 2010.

  120. That is, considered separately from ‘light touch’ regulation and principles-based regulation, both of which carry direct implications for conduct of business regulation.

  121. See, e.g., Department of the Treasury, A New Foundation: Rebuilding Financial Supervision and Regulation (June 2009), at: <http://www.financialstability.gov/docs/regs/FinalReport_web.pdf>, at p. 57.

  122. The Turner Review, supra n. 7, at p. 87.

  123. See further, Moloney, supra n. 137, chapter 4, part IV.

  124. See the Chief Executive’s report in the FSA 2008/09 Annual Report, noting a 34% rise in core supervisory staff.

  125. See The Turner Review, supra n. 7, at pp. 61–70.

  126. See further, Moloney, supra n. 137, chapter 4, part XI.

  127. See the causal factors cited in supra n. 6 (from the FSA Financial Risk Outlook 2009).

  128. See FSA Consultation Paper 10/3, supra n. 115, at p. 3: ‘Although poor governance was only one of many factors contributing to the crisis, it has widely been acknowledged to have been an important one.’

  129. A Review of Corporate Governance in UK Banks and Other Financial Industry Entities (Walker Review) (July 2009), at: <http://www.hm-treasury.gov.uk/walker_review_information.htm>.

  130. See OECD, ‘The Corporate Governance Lessons from the Financial Crisis’, Financial Trends No. 96 Vol. 2009/1, arguing: ‘The financial crisis can be to an important extent attributed to failures and weaknesses in corporate governance arrangements’ and noting weaknesses in corporate governance procedure that resulted in information about risk exposures failing to reach the Board and risk management being activity rather than enterprise-based.

  131. See, e.g., The analysis of the early 1990s Nordic banking crisis in D.G. Mayes, L. Halme and A. Liuksila, Improving Banking Supervision (Houndmills, Palgrave 2001), at p. 91.

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  132. R. Adams, ‘Governance and the Financial Crisis’, at: <http://ssrn.com/abstract_id=1398583>, at p. 15. The argument is based on evidence relating to governance characteristics (of US-listed companies) that apply equally to financial and non-financial firms, such as board independence, board size, amount and structure of pay.

  133. A. Beltratti and R.M. Stulz, ‘Why Did Some Banks Perform Better during the Credit Crisis? A Cross-Country Study of the Impact of Governance and Regulation’, at: <http://ssm.com/abstract_id=1433502>.

  134. See Lex Column ‘Banks Boards’, Financial Times, 25 March 2010.

  135. See, e.g., B. Tricker, Corporate Governance (Oxford University Press 2009), at pp. 35–36, distinguishing governance from management.

  136. For an overview of recent developments in the EC and at the international level, see G. Ferrarini and M.C. Ungureanu, ‘Executive Pay at Ailing Banks and beyond: A European Perspective’, 5 Capital Markets Law Journal (2010) pp. 197–217.

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  137. Companies Act 2006, ss. 420–422.

  138. Walker Review, supra n. 167, at para. 7.1.

  139. Walker Review, supra n. 167, Recommendation 29.

  140. See FRC, 2009 Review of the Combined Code: Final Report (December 2009), at: <http://www.frc.org.uk/corporate/ukcgcode.cfm>. Examples of generally applicable recommendations made by the Walker Review are amendment of the role of senior independent director (Recommendation 11) and board evaluation (Recommendations 12 and 13). The ‘rump’ of the Walker Review not taken into the Combined Code (or the Stewardship Code to be adopted by the FRC) is open to adoption by banks and financial institutions but it will not have the status of ‘guidance’ under the Combined Code in the way that the Turnbull and Smith guidance do. The recommendations made in relation to remuneration have largely been subsumed into the FSA’s Remuneration Code.

  141. The Institutional Shareholders Committee, The Responsibilities of Institutional Shareholders and Agents — Statement of Principles (updated June 2007), reproduced in Annex 8 of the Walker Review.

  142. See FRC, supra n. 187, at paras. 3.76–3.77. The FRC will consult separately on a Stewardship Code.

  143. For a general discussion, see I. MacNeil, ‘Risk Control Strategies: An Assessment in the Context of the Credit Crisis’, chapter 9 in MacNeil and O’Brien, eds., supra n. 24.

  144. FSA Handbook, SYSC (Senior Management Arrangements, Systems and Controls), supra n. 65, at p. 19.

  145. Note also that the FSA announced in Consultation Paper 09/15, Reforming Remuneration Practices in Financial Services (August 2009), at p. 3, that it was incorporating remuneration risk into ARROW (the Advanced Risk Responsive Operating Framework) and other supervisory programmes.

  146. Although the UK has shown itself willing to introduce a bank levy ahead of the US and the EU: see ‘UK Bank Levy’, Financial Times, 22 June 2010.

  147. A cursory search under ‘conflict of interest’ in the FSA Handbook reveals that there are in excess of 100 relevant provisions.

  148. See: <http://www.sec.gov/litigation/complaints/2010/comp21489.pdf>.

  149. See F. Partnoy, ‘Wall Street Beware: The Lawyers Are Coming’, Financial Times, 12 April 2009. See also J. Bethel, A. Ferrell and G. Hu, ‘Legal and Economic Issues in Litigation Arising from the 2007–2008 Credit Crisis’, at: <http://ssm.com/abstract=1096582>.

  150. See Haugesund Kommune, Narvik Kommune v Depfa ACS Bank [2009] EWHC 2227 (Comm).

  151. See Spreadex Ltd v Sanjit Sekhon [2008] EWHC 1136 (Ch).

  152. See Maple Leaf Macro Volatility Master Fund v Rouvroy and Trylinski [2009] EWHC 257 (Comm).

  153. See UBS v HSH Nordank AG [2009] EWCA Civ 585.

  154. However, earlier cases such as J.P. Morgan v Springwell Navigation [2008] EWHC 1186 (Comm) suggest some caution over the degree of protection that the courts will be prepared to extend to clients.

  155. See J.B. Golden, ‘The Future of Financial Regulation: The Role of the Courts’, chapter 5, in MacNeil and O’Brien, eds., supra n. 24.

  156. See Partnoy, supra n. 198.

  157. See D. Rouch, ‘Self-regulation Is Dead: Long Live Self-Regulation’, 4 Law and Financial Markets Review (2010) pp. 102–122.

  158. Such as LMA (London Market Association), ICMA (International Capital Markets Association) and ISDA (International Swaps and Derivatives Association).

  159. See, e.g., ‘Ex-RBS Director Agrees to FSA Ban’, Financial Times, 18 May 2010.

  160. See Bank of England, supra n. 68, at p. 29.

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  1. University of Glasgow, Scotland

    Iain MacNeil (Alexander Stone Professor of Commercial Law)

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I am grateful to my colleague Professor George Walker for comments on an earlier draft.

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MacNeil, I. The Trajectory of Regulatory Reform in the UK in the Wake of the Financial Crisis. Eur Bus Org Law Rev 11, 483–526 (2010). https://doi.org/10.1017/S1566752910400014

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