The United Kingdom: From the FSA to the PRA and FCA — A Model in Continuous Reform

The United Kingdom adopted Twin Peaks in 2013 because its previous regulator had failed during the global financial crisis. Thirteen years later, the Prudential Regulation Authority and the Financial Conduct Authority operate the most actively reforming Twin Peaks regime in the world — pioneering outcomes-based conduct supervision through the Consumer Duty, embedding individual accountability through the Senior Managers and Certification Regime, and continuously refining the boundaries between prudential and conduct mandates. For Caribbean policy-makers and boards, the UK record is the most useful case study available on what good Twin Peaks regulation actually looks like in practice — and on the institutional commitment to continuous reform that good Twin Peaks requires.

How the UK arrived at Twin Peaks

The United Kingdom did not adopt Twin Peaks because the model was theoretically attractive. It adopted Twin Peaks because the model it had previously chosen had failed in identifiable and consequential ways. The Financial Services and Markets Act 2000 had established the Financial Services Authority as a single, unified regulator covering banking, securities and insurance — explicitly the opposite of the Twin Peaks design Australia had adopted two years earlier. The unified-regulator model was the policy choice of the New Labour government and reflected a view that financial conglomeration required consolidated regulation. Through the early 2000s, the FSA was widely regarded as a regulatory innovator and was studied internationally as a model of integrated supervision.

The 2008 global financial crisis was the diagnostic moment. Northern Rock failed in 2007 and was nationalised in 2008. Royal Bank of Scotland and HBOS required emergency government recapitalisation in October 2008, in what became the largest banking rescue in British history. Bradford & Bingley, Alliance & Leicester and several smaller institutions failed or were absorbed into stronger competitors. The Tripartite arrangement between the FSA, the Bank of England and HM Treasury — which had been designed to manage exactly the kind of cross-institutional crisis that emerged — failed to prevent failures, failed to coordinate effective early intervention, and failed to manage public communication during the crisis. Public confidence in the unified-regulator model collapsed.

The post-crisis review process was extensive. The Treasury Select Committee investigation into Northern Rock in 2008 was followed by the FSA’s own internal review, the Independent Commission on Banking under Sir John Vickers, and the Parliamentary Commission on Banking Standards. The cumulative diagnosis was that the unified regulator had failed in three identifiable ways. Prudential supervision had been insufficiently rigorous because conduct concerns and competition concerns had competed for supervisory attention within the same institution. Macro-prudential oversight — the supervision of systemic risk across the financial system — had been institutionally homeless, falling between the FSA’s microprudential focus and the Bank of England’s monetary policy focus. And the boundary between supervision and resolution had been poorly defined, leaving failing institutions in regulatory limbo while the costs to the public purse mounted.

The Financial Services Act 2012, which entered into force on 1 April 2013, was the architectural response. The Financial Services Authority was abolished. The Prudential Regulation Authority was established as a subsidiary of the Bank of England, with a focused mandate to promote the safety and soundness of regulated firms. The Financial Conduct Authority was established as an independent statutory body, with a focused mandate to protect consumers, protect financial markets and promote competition. The Bank of England’s Financial Policy Committee was established, with a macro-prudential mandate covering the stability of the financial system as a whole. Three peaks rather than two, in technical terms, but the Twin Peaks identification remains because the prudential and conduct functions are now functionally separated.

What the UK has done with the architecture

The architectural decision was the easy part. What distinguishes the UK Twin Peaks experience from any other adopter is what the FCA and PRA have done with the architecture in the years since 2013. Three substantive reforms in particular deserve examination because each represents a regulatory tool that did not exist before the UK developed it, and each translates with high relevance to Caribbean policy choices.

The Senior Managers and Certification Regime

The Senior Managers and Certification Regime — universally known as the SMCR — entered into force for banks in March 2016 and was extended to the wider financial services industry in December 2019. The regime addresses a problem the post-crisis enquiries had identified repeatedly: that responsibility for conduct failures inside large financial institutions had become so diffuse that no individual could be held personally accountable for outcomes within their scope. Boards approved strategies. Executive committees implemented them. Specialist functions executed against them. Compliance functions documented compliance. Internal audit reviewed processes. Risk functions reported on risks. But when conduct failures emerged — mis-selling of payment protection insurance, manipulation of LIBOR, foreign exchange rate rigging, IT migration failures — no individual was personally responsible for the outcome. Enforcement action against institutions produced fines that were ultimately paid by shareholders. Enforcement action against named individuals was rare, contested, and inconclusive.

The SMCR responds to this diagnosis by requiring regulated firms to identify, by name, the senior individual responsible for each defined business function. Senior Managers must be approved by the regulator before they take up their roles. They must have written Statements of Responsibilities setting out the specific outcomes for which they are personally accountable. They are subject to the Duty of Responsibility, under which they can be held individually accountable for misconduct in the areas of the firm for which they were responsible, unless they took reasonable steps to prevent it. Certified persons — the layer below Senior Managers — must be assessed annually as fit and proper for their roles. Conduct Rules apply to almost all employees and create individual obligations on integrity, due skill and care, market integrity, customer outcomes and management of conflicts.

The operational impact has been substantial. Boards now know, by name and on paper, who is accountable for what. Senior managers know that fines, prohibitions and regulatory censure can attach to them personally rather than only to the institution. Internal escalation pathways have become clearer. Cross-functional accountability gaps that previously allowed conduct failures to fall between control functions have, in many institutions, been closed. The regime is not perfect — supervisory experience has shown that Statements of Responsibilities can be drafted defensively, that the Duty of Responsibility is harder to enforce in practice than in theory, and that culture change requires more than statutory accountability. But the SMCR has fundamentally changed the conversation about senior management responsibility in UK financial services, and that change is now widely treated as international best practice.

The SMCR responds to a problem the post-crisis enquiries had identified repeatedly: that responsibility for conduct failures had become so diffuse that no individual could be held personally accountable for outcomes within their scope.

The Consumer Duty

The Consumer Duty, set out in the FCA’s Policy Statement PS22/9 published in July 2022 and in force from 31 July 2023 for new and existing products and from 31 July 2024 for closed-book products, is the most consequential conduct regulation development of the last decade in any jurisdiction. The Duty replaces a regulatory framework that had been built on disclosure and fair treatment principles with a framework built on outcomes. Regulated firms are required to act to deliver good outcomes for retail customers. Four specific outcomes are defined: products and services should be designed to meet the needs of identified target markets and provide fair value; communications should equip customers to make informed decisions; customer service should enable customers to use products and services as expected and pursue their financial objectives; and the price customers pay should be reasonable relative to the benefit they receive.

The shift from disclosure-based to outcomes-based regulation is operationally enormous. Under the old regime, a firm that disclosed all material features of a product, complied with sales suitability rules, and treated complaints fairly had largely discharged its conduct obligations. Under the Consumer Duty, the firm must additionally ask: did our customers actually achieve good outcomes from the products they bought? If they did not, why not? What does the data show about customer experience by segment, by vulnerability, by product, by time? What are we doing to remediate poor outcomes where they occurred? The supervisory data requirements are extensive. The board accountability requirements are extensive. The product-level review requirements are extensive.

UK financial services firms have spent the last three years building the data infrastructure, governance frameworks and remediation processes required to discharge Consumer Duty obligations. The remediation programmes have been costly. The cultural shift has been demanding. But the regime is now operational and the FCA’s supervisory engagement under the Consumer Duty is providing the most current evidence available globally on what outcomes-based conduct supervision looks like in practice. Multiple emerging-market regulators — South Africa’s Financial Sector Conduct Authority, Singapore’s MAS, the Central Bank of Ireland, Australia’s ASIC — have publicly noted Consumer Duty as a reference point for their own conduct frameworks. The new Jamaican FSC, in designing its conduct supervisory regime, will almost certainly reference Consumer Duty as a leading-edge model.

For Caribbean institutions, the Consumer Duty is not a regulatory burden waiting to arrive. It is a maturity test. Institutions that can already demonstrate, today, that they monitor customer outcomes by segment, that they conduct fair value assessments of their products, that they support vulnerable customers proactively rather than reactively, and that they remediate poor outcomes where they occur, are operating at the standard the Caribbean conduct regulator will eventually require. Institutions that cannot demonstrate this today are operating at the standard the Caribbean conduct regulator is moving away from.

The continuous reform mindset

The third distinguishing feature of the UK Twin Peaks experience is institutional rather than substantive. The PRA and FCA do not treat their statutory mandates as fixed. They treat them as evolving — to be refined, updated, extended and occasionally reduced as evidence accumulates and as the financial system itself changes. The Consumer Duty did not exist when Twin Peaks was established in 2013. The SMCR was extended to the wider industry only in 2019. The Investment Firms Prudential Regime entered into force in 2022. The post-Brexit financial services regime under the Financial Services and Markets Act 2023 is still being implemented. The Edinburgh Reforms announced in December 2022 set out further reform priorities. The continuous-reform mindset is itself a distinguishing feature of the UK regime.

Caribbean policy-makers should note this carefully. Twin Peaks is sometimes presented in international policy literature as an architectural decision — once made, the work is essentially complete. The UK record shows the opposite. Good Twin Peaks regulation requires continuous institutional commitment to refinement, and that commitment is itself a function of regulatory leadership, supervisory resourcing, and political backing for ongoing reform. Caribbean Twin Peaks legislation passed in 2026 will need to be supplemented by Twin Peaks regulations in 2027, by Twin Peaks technical standards in 2028, and by Twin Peaks revisions in subsequent years as evidence accumulates from operation. The legislative event is the beginning of the work, not its conclusion.

What the UK record has not solved

An honest reading of the UK Twin Peaks experience must also identify what the regime has not solved. Three issues deserve specific note because they reveal the limits of even mature Twin Peaks regulation.

The first is the persistence of conduct failures despite the architecture. The motor finance commission scandal currently working its way through the UK courts, with potential remediation costs estimated at multiple billions of pounds, emerged from sales practices that had been regulated, supervised, and had survived multiple rounds of supervisory engagement. The British Steel Pension Scheme transfer scandal, which led to remediation costs across the financial advice industry, similarly emerged within a fully-functioning Twin Peaks regime. Twin Peaks regulation reduces the frequency and severity of conduct failures relative to its predecessors. It does not eliminate them. Caribbean policy-makers and boards should expect that the post-cutover regime will produce its own conduct cases, and the credibility of the regime will depend on how those cases are handled rather than on whether they occur.

The second is the perimeter problem. The Twin Peaks architecture supervises institutions inside the regulatory perimeter. Activities outside the perimeter — currently including significant parts of the cryptoasset, buy-now-pay-later, and unregulated financial promotions sectors — are supervised more lightly or not at all, despite their consumer-facing impact. The FCA has been progressively extending the perimeter and is now consulting on further extensions. The Caribbean transition will face the same question on a smaller scale, and the answer will need to be deliberate.

The third is the cost-of-regulation question. The PRA and FCA together impose substantial supervisory levies on regulated firms, generate substantial compliance costs, and require substantial supervisory resources. The reform debate in the UK includes voices arguing that the cumulative cost of the regulatory regime has become disproportionate to the consumer protection benefits it produces, and that competitive consequences for the UK financial services sector relative to less-regulated jurisdictions are now material. Whether one accepts this argument or not, the question is real, and Caribbean Twin Peaks design must engage with proportionality from the outset rather than allowing regulatory cost to escalate without scrutiny.

What boards and senior management should take from the UK record

Three operational implications follow directly from the UK record for boards and senior management of Caribbean financial institutions preparing for Twin Peaks.

The first is that individual accountability frameworks should be implemented now, even before legislation requires them. The SMCR-equivalent provisions are very likely to feature in the Caribbean Twin Peaks regime in some form, and even if they do not, the supervisory expectation that boards know who is accountable for what — by name, in writing, with evidence of oversight — is universal across mature Twin Peaks regimes. Boards that have not documented senior management responsibilities at this standard should commission the work in 2026, not 2027.

The second is that customer outcomes data should be treated as a board-level priority. Whether or not the Caribbean conduct regulator adopts a Consumer Duty-equivalent regime, the supervisory expectation that institutions can produce, on request, granular data on customer outcomes — by segment, by product, by vulnerability category, by time — is now a global benchmark. Institutions that cannot produce this data today are exposed when the supervisory request arrives. Institutions that can produce it have an asset that translates directly into supervisory credibility, regulatory engagement quality, and competitive positioning.

The third is that Caribbean institutions should treat the UK regime as an active reference point rather than a foreign curiosity. The Consumer Duty is publicly available in extensive supervisory documentation. The SMCR is supported by detailed FCA and PRA guidance. The product governance, fair value assessment, vulnerable customer, and complaints handling expectations are all extensively documented. Institutions that build their conduct frameworks against these references are building toward where the Caribbean regime is heading. Institutions that build only against current Caribbean requirements are building toward where the regime is leaving.

Good Twin Peaks regulation requires continuous institutional commitment to refinement. The legislative event is the beginning of the work, not its conclusion.

The honest assessment

The United Kingdom adopted Twin Peaks in 2013 after concluding that its predecessor model had failed during the global financial crisis. Thirteen years later, the regime is widely regarded as the most actively reforming Twin Peaks system in the world. The Senior Managers and Certification Regime is now an international benchmark for individual accountability. The Consumer Duty is the leading-edge example of outcomes-based conduct supervision. The continuous-reform mindset that distinguishes the UK regulators from their international peers is itself a regulatory feature worth studying. None of these instruments existed when Twin Peaks was established. All of them were developed afterwards, in response to operating evidence and continuous policy review.

For the Caribbean, the lesson is double-edged. The architectural decision Jamaica is now finalising is necessary but it is the easy part of the reform. The harder work — building a Senior Managers regime, designing a Consumer Duty-equivalent, embedding a continuous-reform institutional culture, calibrating proportionate cost — is the work that will determine whether the Caribbean regime delivers the prevention, the protection and the credibility the architecture promises. The UK record demonstrates that this harder work is possible, that it produces measurable improvements in regulatory outcomes, and that it requires sustained institutional commitment over many years. It also demonstrates that conduct failures persist even in mature Twin Peaks regimes, that perimeter questions are never fully resolved, and that proportionality is a continuing tension.

Caribbean policy-makers, regulators, boards and senior management who study the UK record carefully will be better prepared for the Twin Peaks transition than those who treat it as background reading. The investment in that study, whether by Government in policy design, by regulators in supervisory methodology, or by institutions in governance and conduct frameworks, is among the highest-return investments available in the run-up to the 2026 cutover. The decade after the cutover will reward the institutions and the jurisdictions that took the work seriously and will expose the ones that did not.

 

PARTNER WITH DAWGEN GLOBAL Building to International Standards, in the Caribbean The UK Senior Managers Regime, the FCA Consumer Duty, and the continuous-reform institutional culture that distinguishes the United Kingdom from other Twin Peaks jurisdictions are the leading-edge benchmarks Caribbean institutions should be building toward. Dawgen Global helps boards, senior management, and control functions translate the UK Twin Peaks playbook into operational frameworks for the Caribbean regulatory environment — Big Firm capabilities, with Caribbean understanding. Six advisory engagements designed for this moment: ▸  SMCR Readiness Programme — preparing institutions for Senior Managers and Certification Regime-equivalent provisions through documentation of senior management responsibilities, written Statements of Responsibilities, and individual accountability evidence frameworks. ▸  Consumer Duty Maturity Diagnostic — benchmarking product governance, fair value assessment, communications quality, customer service standards and customer outcome monitoring against the FCA Consumer Duty and emerging Caribbean conduct standards. ▸  Outcomes-Based Supervisory Data Infrastructure — building granular customer outcome data on suitability, complaints, resolution, vulnerable customer treatment and product performance with the segmentation and reporting cadence the new regime will require. ▸  Conduct Risk Framework Modernisation — moving from disclosure-based compliance frameworks to outcomes-based conduct frameworks, including governance arrangements, board reporting, and management information design. ▸  Vulnerable Customer Programme Design — building proactive identification, support and outcome-monitoring frameworks for vulnerable customers across retail and SME portfolios. ▸  Regulatory Horizon Scanning Service — ongoing intelligence on UK, Australian, South African and emerging Caribbean conduct supervision developments, with translation into operational implications for Caribbean institutions. Begin the conversation today. Email: [email protected] Call: 876-929-3670  |  876-665-5926  |  US toll-free 855-354-2447 Visit: www.dawgen.global  |  47 Trinidad Terrace, New Kingston, Jamaica DAWGEN GLOBAL  |  Big Firm Capabilities. Caribbean Understanding.

COMING NEXT IN THIS SERIES

Article 6  —  South Africa, Netherlands and New Zealand: Three Lessons from Three Markets

South Africa, the Netherlands and New Zealand are three more Twin Peaks adopters whose experiences translate directly to the Caribbean. South Africa is the closest emerging-market analogue to Jamaica. The Netherlands shows what good Twin Peaks looks like in a smaller open economy. New Zealand demonstrates the trade-offs of housing the prudential peak inside the central bank. The next article in this series synthesises three lessons from three markets that complete Act II of The Caribbean Twin Peaks Imperative.

ABOUT THE AUTHOR

Dr. Dawkins Brown is the Executive Chairman and Founder of Dawgen Global, an independent, integrated multidisciplinary professional services firm headquartered in New Kingston, Jamaica, operating across more than fifteen Caribbean territories. With Big Four heritage and over twenty-three years of professional experience, Dr. Brown writes regularly on Caribbean financial regulation, capital markets, governance and strategy through the LinkedIn newsletter Caribbean Boardroom Perspectives.

About Dawgen Global