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3. The Bank of England in:

Stanyo Dinov

Central Banks as a Bank Supervisor, page 27 - 44

A Comparison of the Function of the Bank of England, the Federal Reserve and the European Central Bank

2. Edition 2018, ISBN print: 978-3-8288-4110-9, ISBN online: 978-3-8288-6962-2, https://doi.org/10.5771/9783828869622-27

Series: Wissenschaftliche Beiträge aus dem Tectum Verlag: Rechtswissenschaften, vol. 90

Tectum, Baden-Baden
Bibliographic information
The Bank of England Historical background The Bank of England (BoE) was founded in 1694 with the divisions from Charles Montagu and from the plan of the Scotsman William Paterson as a private bank. By manag‐ ing one or another set of governments' accounts, gold‐ smiths and silversmiths deposits via security it became in‐ creasingly powerful over time. The Bank has the monopoly to issue notes and acted as guardian of the gold standard, the bedrock of the international financial system since 1844.24 Until the Second World War the Bank was still pri‐ vate. On 1st May 1946 it was nationalised and became a CB under the control of the HM the Treasury. From then until 1998 the Bank was officially under Treasury control and the Treasury could give the Bank directions ʻin the public interestʼ what it is still may now. However, in fact this prerogative was never implemented and the Bank manage to maintain discrete independence.25 The Trea‐ sury, in effect the Chancellor defines what is mean by ʻprice stabilityʼ and the BoE is responsible for maintaining 3. 3.1. 24 Cf. Richard Roberts (23), 101. Howard Davies and David Green, (21), 11. The Banking Act (BA) 1844 gave the BoE a monopoly on the issue of banknotes. 25 W. Clarke, How the City of London Works, 7th edn. (Sweet & Maxwell 2008), 21. 27 price stability.26 The BoE exercised for many years an in‐ formal supervisory authority over the UK banking system based less on rules than on “moral suasion”.27 Until 1970 s the finance and banking system in the UK was still deregulated. At the time many international banks opened their offices in London and the system has to be changed as per the new demand. With the BA 1979 (enact‐ ed in compliance with the EC First Banking Directive) the legislation authorised the BoE with banking supervision. These were later expanded in the BA 1987.28 This changed in 1997, when Parliament voted to give the Bank opera‐ tional independence with a clear remit to pursue price sta‐ bility. The responsibility of BoE for micro level supervision was stripped by creating the Financial Services Authority (FSA). The BoE lost its priority to regulate the banking sector and became a new task to maintain financial and economic stability in general.29 26 W. Clarke, (n 25), 21. 27 William Blair, The reform of financial regulation in the UK, (1998) Journal of International Banking Law, 44. 28 The BA 1987 allowed the BoE to control advertising for deposits by licensed institutions and deposit takers and it had investigative powers to explore any breaches of restriction on acceptance of de‐ posit and defining its meaning. The BoE has authority to require an institution to provide any information necessary in order for it to carry on with any of their duties under the Act. See also SCF Finance Co. Ltd Masri (No 2) [1987] QB 1002. 29 G. Tett, Fool's Gold, (Abacus 2012), 182. 3. The Bank of England 28 Banking Act 1998 The BA 1998 regulated more clearly the relationship be‐ tween the Treasury and the BoE. The Act established a Monetary Policy Committee (MPC) as a committee of the Bank with the Governor as a chairman, to formulate and implement monetary policy.30 The Treasury could give rec‐ ommendation to the Bank or to the MPC with respect to monetary policy in public interest and by extreme econo‐ mic circumstances.31 The system worked in the way that the Government sets the inflation target and the MPC or‐ ganise its implementation.32 The Financial Services Modernisation Act 2000 A central goal of the FSMA 2000 was to maintain the fi‐ nancial stability in the UK. The FSMA took the banking supervision from the BoE and gave it to the independent new created FSA. The FSA became very powerful in terms of scope, powers and discretion. Its four regulatory objec‐ tives were: market confidence, public awareness, consumer protection and reduction of financial crime. In discharging its general responsibility, the function of the FSA was fo‐ cused on three aspects. 3.2. 3.3. 30 S 13 BA 1998. 31 S 19(1)(2) BA 1998. 32 Nevertheless, the role of the Treasury was not used as a possible option in the FC 2007, when the bank used its obligation as a LLR too late in order to support other banks and the stability of the system as a whole. 3.3. The Financial Services Modernisation Act 2000 29 Firstly, its scope was cross-sectorial, covering the whole financial sector, extending to banking, insurance and in‐ vestment markets. Secondly, it regulates both the prudential and conduct of business aspects of those markets. Thirdly, it has had enormous influence: authorising firms, legislating, monitoring, investigating and enforcing supervisory regime. The idea for single agency model was from the former British Prime Minister Gordon Brown, and represented the view that nowadays all markets come together and finan‐ cial institutions meanwhile become active at the same time on different markets. Therefore, an independent body should collect information and observe all these markets. The FSA cooperated together with the BoE and the Trea‐ sury in order to guarantee financial stability in the UK. In this regard there was established a Financial Services and Market Tribunal (s 134 FSMA 2000).33 The so called “tri‐ partite system” involving the Treasury, the BoE and the FSA which were responsible for the financial stability in the UK. The tripartite committee was a “vehicle for com‐ munication and exchange of views”.34 The division of re‐ 33 The Tribunal was an independent first-instance tribunal to which certain decisions of the FSA may be referred. One of the reasons for the establishment of the Tribunal was the requirement in Arti‐ cle 6 of the European Convention on Human Rights, that person has the right to a hearing before an independent tribunal. 34 Economic Affairs Committee - Second Report Banking Supervi‐ sion and Regulation, Chapter 5, ˂http://www.publications.parlia ment.uk/pa/ld200809/ldselect/ldeconaf/101/10102.htm˃ accessed 2 June 2015. Characteristic of the former Governor of the BoE Sir Mervyn King. 3. The Bank of England 30 sponsibilities between the “tripartite authorities was set out in a Memorandum of Understanding (MoU).35 According s 2 MoU, the BoE was responsible for the stability of the monetary system through its monetary policy function. The Bank oversaw the whole financial system infrastruc‐ ture,36 regarding the payments systems.37 The role of the FSA according the FSMA 2000 was to perform micro-prudential supervision of financial inter‐ mediaries. It supervised financial markets, securities list‐ ing, clearing and settlements systems. The authority per‐ formed conduct-of-business supervision. Regarding the macro-prudential supervision, the FSA's role was un‐ clear.38 It had extensive delegated “legislative” powers, as it 35 Memorandum of Understanding between the HM the Treasury the Bank of England and the Financial Services Authority ˂https:/ /www.google.co.uk/search?q=MoU+tripatute+system+Bank+of+ England+Treasury+FSA&ie=utf-8&oe=utf-8&gws_rd=cr&ei=Rtv FVfbZK8LYggTK1KTYDA˃, accessed 8 August 2015. 36 Bank of England's supervision of financial and market infrastruc‐ tures - Annual Report March 2015, 8, ˂http://www.bankofeng‐ land.co.uk/publications/Documents/fmi/annualreport2015.pdf˃, accessed 8 August 2015. The legal framework that shapes the BoE's supervision of the Financial Market Infrastructures (FMIs) are: Part 5 of the BA 2009; FSMA; Uncertificated Security Regu‐ lation 2001, regulating the security settlement systems. The activi‐ ties on the bank on the over the counter (OTC) derivative market and the central counterparties (CCPs) are regulated through the European Market Infrastructure Regulation (EMIR) and Central Securities and Deposit Regulation (CSDR). 37 Under s 2A of the BA, the objective of the Bank is to protect and to enhance the stability of the financial system in the UK. In pur‐ suing this object the Bank is required to work with the other rele‐ vant bodies including the Treasury and the FSA. 38 S 3 MoU. The FSA's responsibilities as "the authorisation and pru‐ dential supervision of banks, building societies, investment firms, 3.3. The Financial Services Modernisation Act 2000 31 is entitled to make rules and issue requirements as to the financial standing and conduct of authorised persons. It also gained wide powers of investigation and discipline.39 The Treasury, the third party of the tripartite commit‐ tee was responsible for “the overall institutional structure of financial regulation and the legislation which governs it.”40 It had no responsibility for the activities of the FSA and the BoE, but if a financial problem arises with poten‐ tially system-wide consequences, the FSA and the BoE to‐ gether can decide whether the Treasury needs to be alerted, according s 5 MoU. The FSMA 2000 reforms should therefore, not be over‐ stated, but be viewed as a further step in the evolution of banking regulation, rather than in its revolution. Banking Act 2008 and 2009 The Banking (Special Provisions) Act 2008 was the first regulatory response from the British Government in the face of the credit crunch. This emergency legislation was enacted in order to allow the Government to own tem‐ porarily banks which were collapsing, such as Northern Rock. The BA 2009 implemented later the following Capi‐ tal Requirements Regulation and Directive CRR/CRD IV.41 For this purpose created was a special Recovery and Reso‐ 3.4. insurance companies and brokers, credit unions and friendly soci‐ eties". 39 S 284 FSMA 2000. 40 S 4 MoU. 41 Cf. Regulation 575/2013; Directive 2013/36/EU. 3. The Bank of England 32 lution Mechanism (RRM) with special tools.42 Inside the BoE there was introduced a Financial Stability Committee (FSC). In order to enhance the stability of the financial sys‐ tems of the UK, a Special Resolution Unit (SRU) was creat‐ ed inside of the BoE, which had to conduct the resolution of the distressed banks. The SRU planed for and imple‐ mented a Special Resolution Regime (SRR) established un‐ der the BA 2009. The Financial Services Act 2010 The FSA 2010 was the third and the final piece of major legislation implemented by the UK Labour Government in the face of the financial crisis. The Act introduced changes in: Financial Stability Objective, Consumer Education Body, Living Wills. Regarding the first change, the Act introduced a new duty which required that the FSA consider and review its financial stability objective in consultation with the Trea‐ sury (s 1(3) FSA 2010). It allowed the FSA to implement enforcement power in light of this new objective, as op‐ posed being constrained to its previous objective of ensur‐ ing protection of consumers. The Act required, that the FSA implement rules requiring each authorised persons to 3.5. 42 The RRM consists of five stages: private bank transfer, bridge bank, public transfer, special administrative procedure, special in‐ solvency procedure. Some of the tools: ring fencing, preventive stress test for capital adequacy (Article 177 Regulation 575/2013, or CRR IV), conducting supervisory review and evaluation (Arti‐ cle 97 CRD IV). 3.5. The Financial Services Act 2010 33 prepare, and keep up-to-date a recovery plan.43 It regulated the remunerations and the bonuses paid to employees of banks and stabilised the financial system. Financial Services Bill 2012 The Financial Services Bill (FSB) 2012 had to deliver fun‐ damental changes in the UK financial regulation. Under the previous regime, financial stability in the UK was over‐ seen by a tripartite system. One problem with this system was that the monetary policy and the supervision was split in two different institutions and neither one of them was responsible for the leadership.44 There was an ‘under-lap’ of function with no single institution having ‘responsibility, authority or powers’ to monitor the financial system as a whole and to take necessary action to deal with any sys‐ temic threats.45 For instance, the BoE had a separate Fi‐ nancial Stability Division, with the FSA having a parallel function monitoring market exposures. Moreover, there appeared to be little contact between these two and with no direct reporting at the Tripartite Committee level. Fur‐ thermore, the Tripartite Authorities acted not quickly 3.6. 43 S 7(1) FSA 2010. 44 Marcus Killick, ‘"Twin peaks" - a new series or a new chimera? An analysis of the proposed new regulatory structure in the UK’, (2012) The Company Lawyer, 367. 45 Cf. Para. 1.6. Marcus Killick, (n 44), 369. Because the pre-crisis structure left a gaping underlap between the BoE responsible for monetary policy and the FSA for the regulation of individual fi‐ nancial firms, with neither adequately focused on the systemic risks. 3. The Bank of England 34 enough to safe some financial institutions.46 In addition, the system had not ensured “financial stability-in particu‐ lar by failing to identify the risk posed by the rapid and un‐ sustainable increase in debt in the economy.”47 The new Government identified significant fouls in the previous regime.48 Firstly, the BoE, while having statutory responsibility for financial stability, had only limited tools to deliver it and failed to use the tools it had. Secondly, the FSA had regulatory tools for delivering financial stability, but with such a wide mandate including consumer protection, public awareness, market confidence and reduction of financial crime it was not sufficiently fo‐ cused on stability issues. In this regard, the purpose was to separate prudential and conduct supervision, requiring different skills and approaches.49 46 Group of Thirty (20), 41. 47 HM Treasury, "A new approach to financial regulation" (February 2011), Summary: Intervention and options. 48 Ibid., para.1.11. 49 Cf. Speech by Lord Adair Turner, FSA City Banquet at the Man‐ sion House, London. See also Financial Conduct Authority (FCA), Supervision, ˂https://www.fca.org.uk/about/supervision˃ ac‐ cessed on 17th of May 2017. However, the new introduced FCA combined these two approaches. Conduct supervision is focused on big firms and emerging risks affecting multiple firms or a sector as a whole. Firms are divided on fixed and flexible portfolio firms. Fixed portfolio firms have a named supervisor and use firm-spe‐ cific continuous assessment. For each firm are evaluated specific supervisory strategy and underlying work programme at ‘gover‐ nance checkpoints’ during the regulatory cycle. Flexible portfolio firms are supervised through thematic and market-based work, 3.6. Financial Services Bill 2012 35 Thirdly, the linkage between financial institute supervi‐ sion and systemic stability issues had fallen between the in‐ stitutional cracks.50 The July 2010 White Paper referred to ‘inherent weak‐ nesses and contradictions’ in the earlier Tripartite Com‐ mittee model involving the BoE, the Treasury and the FSA.51 While the concentration of regulatory authority within the FSA is referred to, the effect of the new regime was to create an even more powerful CB responsible for regulatory, macro-prudential and monetary policy. The underlying policy objective of the new regime were to re‐ store the position of the BoE as the key financial regulator for the UK financial system. In this regard the FSB 2012 shaped a new regulatory framework. The existed system provides for a shared responsibility for financial stability between the Treasury, the BoE and the FSA was replaced with a new system based on the twin picks model. Accord‐ ing the Act, inside the BoE a Financial Policy Committee (FPC)52 was created and the existing FSA was split into along with programmes of communication, engagement and edu‐ cation. Prudential supervision is focused on systems and controls, gov‐ ernance arrangements, and risk management capabilities includ‐ ing the risk of misconduct. It assesses how well a firm understands the risks it is running, how well placed it, manages those risks, and how well it can avoid large, unexpected costs. Firms are regu‐ lated to one of three prudential categories which are tested on ev‐ ery 24, 48 months or on a reactive basis. 50 Marcus Killick (44), 369. 51 CM 7874, para. 1.5. 52 See s 9B of the BoE Act. 3. The Bank of England 36 two agencies the Prudential Regulatory Authority (PRA) and the Financial Conduct Authority (FCA).53 The new reform established: The Financial Policy Committee The FPC inside BoE became responsible for the develop‐ ment and implementation of macro-prudential policy in the UK. The task of the FPC in this regard is to identify, monitor and take action to remove or reduce systemic and any kind of risk and to protect and enhance the resilience of the financial system.54 The specific functions of the Committee are to monitor the financial system's stability, provide directions, make recommendations and prepare reports. The FPC has to exercise its functions with a view of contributing to the achievement by the BoE of its Finan‐ cial Stability Objective.55 The Treasury and Parliament would be given additional oversight powers in respect of the macro-prudential activi‐ ties of the FPC. The Bill provided for mechanisms that de‐ fines the relationships between the Treasury, the Bank, the PRA and the FCA in the event of crisis in the financial sys‐ tem.56 The Treasury may make recommendations to the FPC at any time in writing with the FPC confirming 3.6.1. 53 Cf. s 1a(1) and 2 a FSMA under s 5 FSB 2012, also Schedules 1za and 1zb FSMA. The constitutional provisions which governed the FSA under Schedule 1 FSMA are amended to apply to the FCA and PRA. 54 Clause 9c(2), (3) and (5) FSA 2000. 55 Clause 9c(1) of the FSB. 56 Recital 12 FSB 2013. 3.6. Financial Services Bill 2012 37 whether it accepts the recommendations and any action to be taken.57 Directions can be issued to the FCA or PRA on macro-prudential measures and the FPC may make rec‐ ommendations within the Bank, to the Treasury or FSA and PRA.58 Therfore, the Treasury became the position as the most influential financial institution in the UK. The Prudential Regulation Authority The Prudential regulation were transferred to the BoE through its subsidiary, the new PRA. The PRA become re‐ sponsible for the micro-prudential supervision of all firms subject to ‘significant prudential regulation’ including banks and other deposit-takers such as building societies and credit unions, broker-dealers and insurers and friendly societies.59 The general function of the PRA is to promote the safety and soundness of the financial system and to en‐ sure that the adverse effect of any failure is minimised.60 In this regard, the PRA works closely with FPC within the BoE and the FCA. Thus some kind of tripatute system was created considering that PRA is a subsidiary of the BoE. The PRA second objective is to ensure safe competition. This secondary objective is only applicable when the PRA is advancing in its primary objectives and does not operate 3.6.2. 57 Clause 9 d FSB. 58 Clause 9g-1, m, n, o and p FSB. 59 CM 7874, para. 3.12. 60 The Prudential Regulation Authority's approach to banking super‐ vision June 2014, 7. 3. The Bank of England 38 as a stand-alone objective. Nevertheless, this goal overlaps with the object of the UK Competition Authority.61 As a part of BoE, the PRA's is connected to the BoE's other functions including its role as LLR, its work on mar‐ ket oversight and infrastructure, prudential policy, finan‐ cial sector resilience and the exercise on resolution pow‐ er.62 Therfore, it becomes a supporting function to those BoEs tasks. By the supervision international active finan‐ cial institutes the PRA had to work actively with other na‐ tional authorities together in supervisory colleges (SCs).63 The Financial Conduct Authority The need to have a separate FCA was justified on the basis of attempting to avoid ‘in-built tensions’ between different regulatory objectives and focusing on the interests of con‐ sumers and market participants in a separate ‘conduct regulatory system’.64 The FCA become principally be re‐ sponsible for ensuring confidence in financial services.65 In addition to its strategic objective, the FCA is assigned three operational objectives of consumer protection, market in‐ tegrity and efficiency and choice.66 It aquired power to is‐ sue rules governing the conduct of all financial firms and 3.6.3. 61 Although in principle the PRA gives the general guidelines and the Competition Commission can enforce them. 62 PRA (60), 16. 63 The PRA would generally be responsible for firms holding $ 9tn in assets and EEA firms with $ 2tn in assets or other systemically im‐ portant institutions. 64 CM para. 4.3. 65 CM paras. 4.4 and 4.6. 66 S 1b(2) and (3) FSMA. 3.6. Financial Services Bill 2012 39 the authorisation of ‘non-prudential firms’.67 The FCA took the micro-prudential oversight and some of the task with which the previous existed FSA was overloted. The FPC and the PRA become responsible for the macro-prudential supervision.68 Therefore, the FSB 2012 restored the central role by the conducted financial supervison by the BoE. Thus, the UK-government through the Treasury could ex‐ ercise more influence on the financial system. Financial Services Act 2012 The Financial Services Act (FSA) 2012 expanded greatly the responsibilities of the BoE, and implemented most of the FSB 2012 proposals. The FPC replaced the Financial Services Committee (FSC), by the BoE. The FPC became authorised to make recommendations to the PRA and the FCA on a comply or explain basis, and to direct both the PRA and the FCA. The Committee has powers in relation to the sectoral capi‐ tal requirements and responsibility for decisions on the 3.7. 67 See (n 49). FCA makes risk-based judgements about whether: the firm’s business model, how it is run, is there a treatment for con‐ sumers, and the firm upholds market integrity, or if it is pruden‐ tially regulate and its financially soundness. 68 See ‘The Prudential Regulation Authority’s approach to banking supervision’ June 2014, p. 4 f. 9, ˂http://www.bankofengland.co.u k/publications/Documents/praapproach/bankingappr1406.pdf˃, accessed 20 May 2017. However, there is a natural synergy be‐ tween these two kinds of supervision. For instance, the FCA regu‐ lates prudentialy the most investment firms, whereas the PRA is a prudential regulator for deposit-takers, insurance companies and designated investment firms. 3. The Bank of England 40 countercyclical capital buffer (CCB) applied to certain fi‐ nancial institutions in the UK.69 A firm-specific regulation of financial institutions that manage significant risks on their balance sheets will be car‐ ried out by an operationally independent subsidiary of the BoE, the PRA. The PRA has to work closely with the FCA and to observe and conduct prudential regulation for big banks, investment firms, security houses and insurance companies. Moreover, it can enforce credit institutes for re‐ covery and resolution plan, a special resolution regime. In this regard, inside the BoE a SRU was created which has to work closely with the Treasury by putting distressed finan‐ cial institutions under the BA 2009 SRR. The FCA carries out the prudential regulation of firms not regulated by the PRA. It became a multifunctional au‐ thority conducting issues across the entire spectrum of fi‐ nancial services. Its operational objectives become: facili‐ tating efficiency and choice in the financial market; pro‐ tecting and enhancing the integrity and confidence of the financial system and securing an appropriate degree of protection for consumers, fighting financial crimes. The Financial Services Act 2013 The FSA 2013 seeks to introduce structural and cultural changes,70 giving the government more power to ensure fi‐ 3.8. 69 The tool is implemented in the UK via the Capital Requirements Directive. Directive 2013/36/EU. 70 It complied with the Independent Commission on Banking (chaired by Sir John Vickers) and the recommendations made by the Parliamentary Commission on Banking Standards. 3.8. The Financial Services Act 2013 41 nancial aid to institutions that are not able to absorb losses. The Act introduced a ‘bail- in’ tool according to Part 3, s 17 FSA 2013 as an additional stabilisation option to the preexisting RRM from the BA 2009.71 Banks were required to have loss absorbing capacity, in addition to the levels of capital required by the Basel III-Regime and the CRD IV. The FSA implemented a special administration for opera‐ tors of certain infrastructure systems,72 restricts the powers of persons other than the BoE in relation to the insolvency of infrastructure companies. The Act ensured that the PRA strictly separates, or ring-fences banks' retail from invest‐ ment activities. It finally introduced a cap for payday loans, higher sanctions for financial crimes, and implemented a financial services compensation skim. Assessment Since its foundation the BoE has assumed a very important role within the UK economy. The two main objectives of the Bank are to ensure the financial stability of the national economy and act as a financial regulator. Along with its monetary function, the Bank took its "old new role" as a bank regulator after the global financial crisis and the UK credit crunch. Thus, the BoE became responsible for the key financial areas: macro-prudential; monetary; liquidity 3.9. 71 The purpose of the bail- in tool is to recapitalise the entity and to ensure the continuity of all service and transactional arrange‐ ments. The PRA must consider that any other action cannot be taken to avert the failure. In addition, the BoE must determine that it is in public interest to use the bail-in tool. 72 Part 6 s 111ff. FSA 2013. 3. The Bank of England 42 policy; LLR; resolution; payments clearing and settlements. In this regard, the Bank developed into a super-authority concentrating and centralising power, rather than counter‐ balancing this power between different authorities, as in the previous regime between the monetary policy by the BoE and the supervision by the FSA. Moreover, authoris‐ ing the BoE as a prudential regulator of all financial insti‐ tutions, there is still a risk to repeat the mistakes with the FSA, as a single authority responsible for many tasks.73 One problem of the previous system was that there were not clear responsibilities for the UK financial regulation authority and the tasks seem to be fragmented with the new reform.74 The twin-peaks supervision becomes in some cases hard to distinguish between prudential and conduct-of-business supervision.75 The effectiveness of su‐ pervision would not be improved with the increase in the number of involved agencies, but the costs of the conduct‐ ed supervision would probably increase.76 There is also no clear synchronisation between the authorities which are not under the supremacy of one body. Furthermore, combining the Bank's responsibility for monetary policy with the financial supervision could cre‐ ate further problems. The Bank's reputation would be at risk from failures in either activity. The different objects of both functions could 73 Michael Taylor, "Twin Peaks": A Regulatory Structure For The New Century, Financial World 2009. 74 Ibid. 75 Ibid. 76 Cf. Debates in the House of Lords (Q 518), (Q 552); Lord Turner Lord Myners views, Economic Affairs Committee (n 34). 3.9. Assessment 43 lead to errors in prudential supervision, potentially dam‐ age monetary policy-credibility. In addition, the BoE becomes responsible not only for the banking supervision what is its entire nature in com‐ parison to other CBs such as the ECB but for the whole financial sector including security firms and insurance companies. In this respect it raises the question how well it is able to segregate commercial from investment banking. Another issue is that to some extent the functions of the PRA and the FCA by the recovery and resolution pro‐ cedure (RRP), regulating prudential standards and pro‐ moting healthy competition and market integrity, over‐ lapped themselves. The last role also cover the tasks of the UK Competition Commission. Therefore, the new reforms authorising the BoE with more power and functions which are spread between dif‐ ferent bodies should be differentiated more precisely in or‐ der to avoid previous mistakes with one super-authority. 3. The Bank of England 44

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Abstract

Stanyo Dinov analyses and compares the three most advanced and most influential financial systems in the world, their structure, models of regulation and their actual financial legislation against the background of the global financial crisis in 2007. After a brief introduction, the first chapter is devoted to the function of the Central Banks and the two main divisions theories about the role of the CBs, namely their responsibility for monetary policy, or for monetary policy and banking supervision. The work also displays the four existing regulative approaches to financial supervision: the Institutional, the Functional, the Integrated and the Twin Peaks. The main part represents and compares the Central Banks and their regulatory structure, starting with the oldest one, the BoE. The benefits and the drawbacks of the one or the other system are outlined. In the conclusion, the most important results are presented and an ideal modal solution is suggested.