Question 1

The ‘Regulatory structure’ in relation to the financial regulators is considered to be an intricate matter and this topic has been considered regarding various studies and discussions. Even though no consensus exists in connection to the preeminent model, it may be said that the models may commonly be separated into four classifications. The first one is considered to be the sectoral or the institutional model. In this case the legal position in relation to the financial intercessor decides or concludes that which regulator might be accountable regarding the market conduct and supervision. The second one is considered to be the functional model. In this particular case the intercessors are governed on the basis of the function or the activities that is planned by them in relation to the financial division. The third as well as the fourth model, both are regarded as the assimilated and combined model. In one type, both the market comportment and the sagacious supervision in relation to every financial intercessors is governed by a particular amalgamated controller. Another type is considered to be the ‘twin-peaks’ model. Regarding this model responsibility and the accountability is in relation to the central banks. Such accountability is regarding every sensible and sagacious issues that may include commercial and monetary steadiness, management of crisis situations and payment structures. In case of the ‘twin-peaks’ model, another regulator or controller exists, which emphases on market transgression and issues in relation to intercessors and the investors ( also known as the customers) all through the business or commercial sector.

In the case of RBS, the first two models may be implemented. As per the first model, that is, the institutional model, the market conduct of RBS may be discussed. It may be stated that RBS has prospects abroad, and has the ability to progress and advance its business, trade and commerce in the international market, which shall work to the advantage of its investors or customers. However, it may be mentioned that the government of the nation of United Kingdom is not keen on providing support to RBS, which reduces the probabilities for expansion and growth, and such facet is very much disadvantageous for the investors of RBS. It may also be mentioned that RBS has been facing a lot of perils and jeopardies in relation to globalization like market risk, variation in rates of interests, problems relating to foreign currencies and credits crisis. Applying the functional model regarding RBS, it may be stated that RBS is counted among the biggest financial organizations globally. RBS is counted among the foremost financial services corporations internationally, which provides a series of corporate and retail banking, finance for consumers, financial and commercial markets, insurance, and services relating to management of wealth. It must be mentioned that RBS provides its services to a quantum of approximately thirty six million customers internationally and more than one lakh forty thousand individuals are employed in RBS. All such services and activities of RBS are advantageous for its consumers.

The regulators have introduced two approaches which would help in improving the scope of banking regulations in the UK. The banking regulation went through changes which were significant after the financial crisis. The first approach that had been introduced was considered to be the principle based regulation approach, which was considered to be utilized by that of the FSA, and such had evolved into the objectives-based regulation approach which concentrated on the threats which were posed by the firms. These were exercised through supervision and regulation which concentrated more on the outcome of various processes. The difference between these approaches were considered to be that these approaches tried to identify and eliminate the various problems or the difficulties before such became sources of the consumer market and thus, as a result became detrimental.

The two approaches which were relating to the principle based regulation approach along with the objective based regulation approach are considered to accrue benefits in the banking sector as they work comfortably alongside of that of the proactive regulation and the supervision. Such also benefits by providing credit deterrence. Due to rigorous supervision and monitoring, there has been a greater emphasis and attention given to the risk management procedures. These in turn are helping and benefitting by developing the banking institutions. There have been measures taken to improve the accountability of the individuals who are associated with the banks. However, in comparison to such since it has been set against a political backdrop both the FCA and PRA needs to be prepared for the new challenges or the difficulties as they pose a threat to the functioning of the institutions in an effective manner. The stakeholders are considered to be having maximized shareholder value. The commercial banks have a greater focus on the various needs of the customers and it also includes better service for them. Therefore, these help in benefitting the stakeholders in the banking institutions. On the other hand, at times the stakeholders face certain difficulties if capital constraint is considered to be low and if the banks are inefficient. Therefore, these effect the stakeholders in a way as they operate in the regulatory framework and play a pivotal role in the banking institution.

The information had been gathered through various qualitative data and quantitative data that tried to focus on the relationship between the banks and other industries. The losses were analyzed and the cause of liquidation was considered to be understood and comprehended through the methodologies.

Therefore, in conclusion, it can be understood that the stakeholders are considered to be focused on the interests, which would profit them majorly. However, these are not considered to be common for the exclusive to the various external stakeholders. In case of a hypothetical scenario the internal stakeholder might be inexperienced investor and they might vote against some kind of a proposal or growth which would be in fear to lose the money as such stakeholder would be concentrated on the financial needs of his own and not on the business.

 Question 2

The GRC or the Governance, Risk and Compliance is considered to refer to a strategy which would be used for managing the overall governance of some firm or organization and would also help in reducing the risk by helping in management of such. This would be through compliance with the various regulations. The GRC is considered to be a structured approach which are aligned with the business objectives and such are considered to effectively manage the risks by meeting the various requirements. A structured and well-planned GRC is considered to come with various benefits which include the decision making or more optimal investments in banking or financial sectors. Governance is considered to ensure the various organizational activities in a way which would help in supporting the goal of the business and the organization. Risks would help in  ensuring the dangers which are associated with the different organizational activities which would be required to support the goals of the organization or the business. Compliance on the other hand would mean that the organizational activities are to be operated in some way which would help in causing an impact through the regulations and law in order to achieve success in the business.

The organizations are considered to develop a framework relating to GRC for leadership of the organization and several other operation in the organization which would help in supporting and enabling the strategic objectives of the organization. The framework is also considered to define the assessable conditions, which would help in shinning the light on the effectiveness of the organization relating to the GRC efforts. The key to the successful implementation of the GRC are considered to be the decision-making and the resource or the portfolio-management which would be in compliance with the regulatory functions and such needs to be supported by the leadership of the organization for a cultural change. The implementation would not be considered to be successful if the culture of the organization do not evolve enough to support the activities of the GRC. One of the most dominant themes of GRC are to manage the various risks with greater dexterity. The increased amount of regulatory expectations and various other ongoing emergence of the new risks try to represent a new paradigm for the operations.

Economic Environment: The organizations in today’s day and age are considered to have this approach and in order to manage such. There are primarily three principles which needs to be taken into consideration as such influences the economic environment. There needs to be an increased focus on the risk and compliance, which not only brings down the cost of various other regulatory fines and such are considered to increase the amount of customer trust. With a rapid increase in the rise of various regulations that are considered to be related to the technologies the banks are considered to be pushed to expose the data and other services to that of the external environment. The compliance based approach is considered to be good for the management of preventable risks. However, such approach is not considered to be beneficial for the strategic risks or the external risks. The risk identification process is carried out after having a clear understanding of the risks that are involved in the business. In the Royal Bank of Scotland there are several risks related to the operations which include increased amount of losses which are increasing due to the cyber attacks, or the risks which are involving the failure of the information technology system..

Political Environment: The Royal Bank is considered to be a primary operating subsidiary which are incorporated and headquartered in Scotland. The Scottish government is considered to hold a referendum and the outcome of the referendum is considered to be uncertain and they are subject to various mitigating factors. These rise due to an affirmative vote which is for the independence and such would likely try to impact and effect the ratings of the group or the Royal Bank and this has the capacity to effect the fiscal, legal, monetary and regulatory landscape. The occurrence  of these impacts effects the cost of the group and such in turn have the adverse effect on the business and the financial condition.

With the increasing media attention and focus, the companies or the organizations are considered to be able to implement the GRC approach which is considered to be the Governance, Risk and Compliance approach as such helps in creating an effective business structure in the economy. The political environment is considered to be dominating and has become powerful as the government is considered to be involved with various developmental process and they have the power to influence various organizations in the Royal Bank of Scotland in UK.

Question 3

The Corporate Social Responsibility is considered to be a broad concept which provides that the companies or the organizations have the obligation which extend beyond that of the shareholders. It also helps the companies to consider various interests of the stakeholders which would be inclusive of the interests of the stakeholders or the investors or the suppliers or consumers. The concept of the CSR is supported by the ideology that the corporations would no longer be isolated entities economically. It has been understood in the past that the governments are considered to rely on the legislation and various regulation, which would be in order to deliver the objectives socially as well as environmentally in that of the business sector. They should be implemented in a manner, which would be prescriptive and there needs to be an approach which would be used in order to benefit the firm or the organization. On the other hand the forms should be able to use approaches in accordance with that which suits them. The companies or the organizations are considered to respond to the activities. There has been no specific requirement under the legislation for the CSR reporting requirement. The organizations on the other hands are becoming responsive and aware of the various community pressure which gives pressure to report on several factors other than that of the financial bottom line. These would help in ensuring the work, health and safety of the employees who have been associated with the business. If the companies have the ability to choose the CSR on their own then they would be able to come up with various ideas which would benefit the company and help them reach great heights.

The Royal Bank of Scotland is considered to be an organization which has been having the CSR and such is considered to be the largest ongoing longitudinal study for various CSR practices. This particular organization or group helps in creating an impact as it has its own rules and regulations as these are prescribed and regulated by the financial regulators FSMA. As it can be understood that there are two approaches which work effectively which are the principle based regulation approach and the objective based regulations from on approach. These are beneficial as it helps in increasing the costs and protects the banks from any form of liquidation.  It takes an effort in benefitting the employees by providing facilities to them and taking care of their interests, which helps them as the employees work, or function in an effective manner. Therefore, due to such it creates an effective place for the workers to work in the organization. On the other hand, the major disadvantage is that it has slow growth rate in the business. Therefore, it can be understood that there are various objectives and things which control the functioning of an organization and which also determines the effectiveness of the organization. Therefore, such depends on the companies as to which approach would be beneficial for them and assist them and their growth.

Question 4

The financial crisis in the UK had included an increase on a high-street bank, it also provided with the nationalization of two of the largest banks around the world, and the serious inadequacies or deficiencies were considered to be publicized. The monolithic financial regulator which was considered to be the Financial Services Authority had an insufficient focus which would lead to non-handling of issues and the regulator had hugely depended on the tick-box approach. The Bank of England was not considered to have any devices or tools which would help them fulfill their responsibility or duty in order to ensure financial stability. The treasury on the other hand had the duty to maintain several institutional framework but there were no clear duty provided for dealing with any emergency or crisis and due to such the public funds were considered to be at risk. There were no single institution which had any kind of duty for monitoring and supervising the system and to identify or discover the risks which were associated with them in order to maintain and ensure monetary or financial stability. Therefore, due to such, the Coalition government was considered to commit fundamental reform for the framework of that of the financial regulation. The government after consultation had published ‘A new approach to financial regulation: judgement, focus and stability’. This provided with proposals to refurbish the UK financial regulatory system which would be disbanding the FSA and try to establish a new system which would be consisting of specialized and focused regulators. Due to this a new regulator had been established which was Financial Policy Committee. A prudential regulator PRA which was Prudential Regulation Authority had been constituted which was considered to be the subsidiary of the Bank and along with such a new conduct of business regulator had been set up which was CPMA. The government through consultation constituted these in order to achieve accountability and transparency, balancing the essential statutory objectives. It also aimed to achieve effective coordination or cooperation which would be between the new authorities and try to regulate the market and the future of the UK Listing Authority along with the European and the international agenda.

In order to implement such the government tries to ensure an effective policy-making process. In order to maintain transparency the government along with the new regulatory authorities tried to ensure efficient and stable financial services through effective regulation by the focus and the judgement with the help of independent expertise which were considered to be balanced with the accountability mechanisms. With the new approach that was set out through judgement, focus and stability the intention was to maintain transparency by publishing various records in the meetings and setting out various decisions which would also have a balance of the arguments which would ultimately lead to those decisions. For instance in order to enable the publication of various relevant supervisory information which was appropriate the firms tried to adapt the best-practice approach to their regulatory compliance.

There were new regulatory framework with new authorities were ensured where they had a single statutory objective. Such an approach helped in the creation of the specialized and forced regulators which helped in bringing a more streamlined focused approach. In order to help in economic growth the government recognized the significance of financial stability and focused on the economic growth as such was given the primary focus.

With such approach the new regulatory framework worked in improving the gaps that had been prevalent and the regulators were taking assistance of various approaches to reduce those gaps. Such was taken into consideration by the government as it helped in developing the legislative provisions which would help in ensuring appropriate coordination and cooperation with the regulators. It was also understood that in order to establish the authorization of the authorities they needed to have a separate identity or distinct identity. To ensure such the PRA along with the CPMA would enjoy equal status with PRA’s veto only if such was necessary in order to protect and secure the financial stability. Therefore, it can be understood that, these improved initiatives taken or implemented by the government along with the financial regulators tried to reduce the gaps which were discovered during the financial crisis.

It has been understood that as regulators they have various powers in order to enforce the set of rules and regulations provided by them and if the regulatory standards have not been met with then the penalties are applicable which depend on the grievousness of a crime or an offense. In the case of Money Laundering, in order to prevent such practices there have been various penalties applicable and the financial regulators exercise their powers for such offences or crimes committed. Therefore, in this way the regulators enforce their powers and provide with authorization which helps in creating an effective place in the banking sector.  

The process or the approach through would be fair and efficient. The financial regulators try to ensure the financial licenses and also aims to supervise and monitor the businesses to operate in a financial manner. They are considered to be responsible for the various supervision of the operators of that of the financial markets. They investigate the suspected breaches of the laws. It also tries to issue the infringement notices which are considered to be in connection to that of the breaches in the law and the regulation. It also helps in ensuring civil penalties form the court of law and tries to commence the prosecutions. This particular approach is considered to benefit the regulation as the corporations would not enter into any kind of misconduct if the strict regulations and powers are provided to the financial regulators. The regulators need to be able to exercise their duties in an efficient manner and such would help them to ensure that the corporations are running in an effective manner and they would be able to grow financially. The interests need to be met with. The current approach can be further improved by providing grievous punishments for the acts which would make the corporations or the companies to not act in a manner, which would harm the interests of the others and therefore, such needs to be met with, and it needs to be done in compliance with the regulations.  Therefore, in conclusion, it can be understood that the regulators have the power to exercise their functions and be able to regulate in the financial sector in a way which would maintain a certain amount of harmony among the corporations and let them function in an effective manner.

Question 5

A major determinant in that of the effectiveness of the government is considered to be the regulatory systems and their functioning which would help in achieving various policy objectives. The rapid increase in the various regulations and the formalities of the government in most of the OECD countries have provided with various impressive gains which would be in the area of social and economic well-being.

According to the author Tomaney, it has been stated that the major reasons for non compliance or challenges faced by the Board for regulatory compliance would be due to the fact that such creates unnecessary costs which in turn provides with fruitless administration and execution. If the policy objectives are considered to be postponed and not achieved. It tries to erode the general confidence which would be used in the regulation or the rule of law or through the government in general. The non compliance is considered to be related to that of the regulatory knowledge where the requirements are considered to be too complex and is not comprehensible. It is also considered to be through the regulations which are legalistic. There would be regulatory unreasonableness and stringent rules which would be considered to be irrational and would not make any sense. If the regulation is considered to be at odds with that of the market incentives and other cultural practices. If there has been failure to supervise or monitor or there has been some kind of procedural injustice. The Board may also face difficulties if there has been any failure of the deterrence. The Board faces these challenges or difficulties due to restricted and limited regulatory agency resources or through the lack of implementation and supervision. If the objectives were considered to be clearly comprehended then such would have been successfully attained through some other means. However, it has been stated by the author that such can be solved by the Board but they have to identify the problem at first and try to come up with solutions which would help in enhancing the performance. The policy makers in order to improve the regulatory compliance develop the regulation. If there were any systematic failures the credibility would break down to that of the rule of law system. The evidence for full compliance systems are less and achieving such is not considered to be possible at times.

According the author Tomaney, it has been stated that, the monitoring compliance is considered to be a key part of the evaluation programs which are present for the prevailing regulations. The information is considered to be gathered and collected which is in accordance to the compliance rates and after such the impact is considered to be assessed due to the regulatory interventions which are on the compliance. However, it has also been stated that, the governments are considered to find these things difficult in order to collect or gather such systematic data through various quantitative outcomes and such are difficult to weigh or measure.

According to the author, the Board in a corporation or organization is considered to govern and regulate the management of the company. They are in charge of the management of the corporation and to exercise their powers and functions according to the interests of the company. There are certain challenges or issues related to the Board in governing the company where they have to see to the fact that the company cannot turn into a regulatory burden. The directors have raised their own concerns regarding such and in order to reduce such proper strategies and initiatives need to be in place which would help in determining these and help in creating an effective market for the company to function. The challenges are considered to have various pressure on the boards which would help them in using an appropriate amount of skills to take care of the challenging business conditions and find areas which would help them in attaining various opportunities of growth. The Royal Bank of Scotland in the UK also needs to take care of the challenges faced by the cross border opportunities and need to work on providing the corporation with various initiatives which would help them increase their market internationally. However, such does not happen frequently as the banking sectors are more focused on their domestic operations and therefore restricts and limits themselves in the international market.

Therefore, in conclusion, it can be understood that, in order to improve the governance the Board needs to take leadership and management functions, which would help them in understanding the scope, and opportunities of the business and help them to grow such in order to attain great heights. The Board needs to be more focused on improving the functioning and growth of a corporation or a company, as there are various opportunities in today’s day and age.  

Bibliography

Aldohni, A. (2016). Is Ethical Finance the Answer to the Ills of the UK Financial Market? A Post-Crisis Analysis. Journal of Business Ethics, 151(1), pp.265-278.

Anderton, Chris 2010 ‘A many-headed beast: progressive rock as European meta-genre’ Popular Music 29/3: 417-435.

Anon, (2019). [online] Available at: https://www.cairn.info/revue-economique-2007-1-page-59.htm [Accessed 19 Dec. 2019].

Baden, Denise. “CSR: An opportunity for SMEs.” Innovative CSR. Routledge, 2017. 84-101.

Davidson, Sinclair; De Filippi, Primavera & Potts, Jason 2016 ‘Disrupting Governance: The New Institutional Economics of Distributed Ledger Technology’ SSRN Electronic Journal.

Financial Services and Markets Act, 2000.

Peart, Nicola 2015 ‘Life beyond Death: Regulating Posthumous Reproduction in New Zealand’ Victoria University of Wellington Law Review 46/3: 725

Sottocornola, M. (2016). Compliance Risk in the European Insurance Industry: Setting a Common Playing Field. SSRN Electronic Journal.

Tomaney, J. (2016). The UK Regional-National Economic Problem. Geography, Globalisation and Governance. Regional Studies, 51(3), pp.502-503.