What China CAN Learn From The UK Financial Regulatory Reform In The Post-financial Crisis Era?

The global financial crisis which was triggered by the US subprime mortgagecrisis has a serious impact on the UK financial industry. After the outbreak of thecrisis, the UK government actively took some measures to rescue the financial market,and also to analyze the causes for the outbreak of the crisis. Lessons learned from thefinancial crisis, the UK government should correct the defects of financial regulationto prevent another potential financial crisis, and actively promote the reform offinancial regulation. In this reform, FSA as a single regulator was abolished, and wasreplaced with a Twin-peaks model which includes two separate agencies, thePrudential Regulation Authority and the Financial Conduct Authority. The power ofthe BoE was reinforced in this new arrangement. In a macro dimension, the FinancialPolicy Committee (FPC) established in the BoE. In a micro dimension, there are twoseparate agencies: Prudential Regulation Authority (PRA) and Financial ConductAuthority (FCA). The essential purposes of the UK financial regulatory reform are tomaintain financial stability, protect consumers’ interest, and prevent financial risks.The main reforms contained following aspects: the establishment of the centralposition of the Bank of England (the BoE) in financial regulation, strengthening theMacro-prudential regulation, monitoring of systemic risk, maintaining financialstability, and improving effective cooperation and coordination among the financialregulators. Although some underlying weaknesses of this new UK financial regulatoryframework may dent its effect in the future, to a certain extent this new regulatory arrangement would be fit for purpose which the UK government hopes to see.Although, Chinese financial market is relatively closed, and was not severely affectedin this financial crisis, Chinese financial regulatory system has many problems. Thus,Chinese financial regulatory system need to be reformed, and Chinese government isnow making some measures to improve financial regulatory system. Chinesegovernment can learn UK’s experience. The thesis of this paper is that based onanalyzing UK financial regulatory reform, some suggestions about Chinese financialregulatory reform are made. Firstly, the single regulator (FSA) is summarized and theproblems on integrated model which emerged in the global financial crisis areintroduced; Secondly, the new UK financial regulatory framework is introduced andevaluated; then in view of analyzing Chinese financial regulation problems, somesuggestions about Chinese financial regulatory reform are made.