The FSA and the Bank of England Publish Joint Review of Requirements to Enter Banking Sector
Coming as part of a UK government initiative to increase competition within the banking sector, the joint review covers reforms to the authorization process and prudential requirements for new banks. Authorizations will be divided into two pathways, one suitable for firms which already have the means to set up a bank quickly, and the other involving a 3 stage incremental process intended for firms with fewer resources. This will mean that less well resourced firms can receive an initial (although restricted) authorization without having to commit to assembling the onerous capital, IT and infrastructure requirements.
Turning to prudential requirements, the UK's forthcoming prudential regulator, the PRA, will take a pragmatic view towards setting the capital requirements for new banks. This will involve temporarily allowing new banks to hold leaner capital barriers than their larger, more established competition, in recognition of the lower systemic risk they pose.
A number of the reforms set out in the review have already been implemented by the FSA, and the remainder will be implemented after the UK financial regulation legal cutover date on April 1, 2013.
The FSA Fines Prudential £30m over its Failed $35.5bn Bid for AIA
The fine has been levied for Prudential's failure to inform the FSA that it was seeking to acquire the Asian arm of AIG at an appropriate time, in breach of FSA Principles and UKLA Listing Principles. Prudential should have notified the FSA of its intentions at the earliest opportunity, so that the regulator could decide whether to approve or reject the deal on regulatory grounds. But according to an FSA news release, Prudential failed to reveal its intentions to the FSA even when quizzed on its plans for expansion in Asia. The delay in notification, which finally came after a press leak, meant that the FSA was forced to rush its analysis of the proposed deal.
In addition to the fine, the FSA also censured Prudential CEO Tidjane Thiam, although it stopped short of finding any lack of fitness or propriety on his part.
Cyprus Agrees to Bailout Terms
Cyprus has come to an agreement with the European Union and the International Monetary Fund (IMF) for a €10bn bailout in an attempt to avoid the collapse of its banking sector and the impact that would have on the wider economy. The agreement has resulted in banks in Cyprus re-opening after a two week closure. Despite initial concerns that there would be a rush to withdraw deposits, bank branches have remained relatively calm.
The terms of the bailout agreement require a significant restructuring of the Cypriot banking sector and put in place various other measures, including increases to taxes and privatizations. Cyprus's second largest bank, "Laiki Bank," will be forced to shut down, and all deposits over €100,000 will be moved into a "bad bank." Deposits under €100,000 will be moved to Cyprus's largest bank, the "Bank of Cyprus," which will also be subject to restructuring. Amounts over €100,000 deposited at either bank will be converted into bank shares or "bailed in."