What comprises the twin peaks regulatory regime?

The twin peaks regulatory regime is fundamentally structured around two main regulatory bodies: the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA). This model is designed to provide a clear division of responsibilities, where the PRA focuses on the stability and resilience of financial institutions, while the FCA ensures that consumers are protected and that markets function well.

The PRA is responsible for the prudential regulation of banks, insurance companies, and investment firms, emphasizing the soundness and stability of these institutions. This includes maintaining capital adequacy, liquidity, and overall systemic risk management.

On the other hand, the FCA is tasked with regulating conduct in financial markets and protecting consumer interests. It works to promote competition and make sure that firms act with integrity, ensuring that consumers are treated fairly and can trust the financial services they use.

This dual approach allows for a more holistic oversight of the financial sector, addressing both the macro stability of institutions (through the PRA) and micro conduct issues (through the FCA). By separating these responsibilities, it promotes greater accountability and clarity in regulatory practices, ultimately contributing to a healthier financial environment.