Source: WE BANK

"Quasi-bimodal" Mode of Target Supervision

The most important reason why the"bimodal" regulatory model is widely recognized is that it is conducive to improving the macro-prudential policy framework and preventing systemic risks. Taking the Bank of England and Financial Services Bill 2016 promulgated in 2016 as the standard, the UK formally changed the supervision mode from the tripartite supervision system (Bank of England, Financial Services Authority and Ministry of Finance) to the"bimodal" supervision system, and established a supervision system led by the Bank of England and coordinated by macro and micro prudential supervision mechanisms. After the reform, Britain's"bimodal" supervision mode is respectively under the responsibility of the Bank of England's Monetary Policy Committee (MPC), Financial Policy Committee (FPC), Prudential Supervision Committee (PRC) and Financial Conduct Supervision Authority (FCA), which is independent of the Bank of England.

Compared with the institution-oriented regulation emphasized in the past, the bimodal reform plan follows the principle of Objective-based Regulation (i.e. Ensuring the stability of the financial system and preventing systemic financial risks, which is embodied in macro-prudential policies; The safety and stability of financial institutions are reflected in prudent supervision; Protecting financial consumers, embodied in behavioral supervision), the Financial Policy Committee is responsible for monitoring and taking measures to reduce systemic risks in order to achieve the goal of macro-prudential supervision; The Prudential Supervision Committee is responsible for prudential supervision of different types of financial service companies in order to achieve the goal of micro-prudential supervision. The Financial Behavior Supervision Bureau shall be set up outside the central bank to manage the behavior of companies and institutions in order to achieve the goals of behavior supervision and consumer protection. At the same time, in order to promote financial innovation and the development of new financial services, the UK has also introduced a"regulatory sandbox" system to provide an innovative environment for qualified financial technology enterprises and facilitate enterprises to test their innovative financial products, services and business models.

Unlike Australia's Prudential Supervision Agency and Behavioral Supervision Agency, which are completely independent of the Central Bank, Britain's Prudential Supervision Agency (PRA) and Behavioral Supervision Agency (FCA) operate under the guidance of the Bank of England, i.e. The bimodal institutional level is lower than that of the Bank of England. PRA and FCA independently formulate and implement their respective regulatory policies while maintaining close coordination. Therefore, Britain's financial regulatory framework is called the"quasi-bimodal" model. In addition, the Australian Prudential Supervision Authority is only responsible for the prudential supervision of banks, insurance companies and most pensions, while the British Prudential Supervision Authority can also carry out prudential supervision of securities companies that meet specific standards.

After Brexit in January 2020, the financial system faced shocks. As the strict prudential supervision and trade rules of the European Commission restrict the development of British finance to a certain extent, it is expected that Britain will gradually relax its regulatory policies during the 12-month transition period after Brexit.