Financial Conduct Authority

HM Treasury written question – answered on 21st October 2015.

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Photo of Andrew Rosindell Andrew Rosindell Conservative, Romford

To ask Mr Chancellor of the Exchequer, what steps his Department is taking to ensure that the Financial Conduct Authority acts to prevent companies from fraudulently using capital raised from selling ring-fenced bonds to bail out poorly-performing parent companies.

Photo of Harriett Baldwin Harriett Baldwin The Economic Secretary to the Treasury

The Government has legislated to ensure that the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA), are fully empowered to maintain the integrity of the ring-fence, and to take action in preventing this type of misconduct.

The ring fencing regime includes requirements that directors of the ring-fenced body (RFB) be able to take decisions independently of group entities; that transactions with group entities be on arm’s length terms; and that arrangements with other group entities should be managed as with third parties.

The PRA and the Bank of England have powers to take action if such a transaction were to have a potential impact on the prudential resilience or resolvability of the RFB. The FCA can also take enforcement action for breaches of its rules or for these types of market abuse, which includes the imposition of substantial financial penalties.

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