FSA launches FCA approach document
27 Jun 2011 12:15 PM
The Financial Services Authority (FSA) has today outlined how its successor body charged with conduct and markets regulation will be tougher, bolder and more engaged with consumers.
The approach document sets out how the Financial Conduct Authority (FCA), which will assume responsibility for protecting consumers and markets’ regulation from the end of 2012, will deliver its objectives.
The Government has recently published a White Paper outlining how the FCA will:
be more outward looking and engaged with consumers and better informed about their concerns and behaviour where this is relevant to regulatory action;
intervene earlier to tackle potential risks to consumer protection and market integrity before they crystallise; and
be tougher and bolder, building on and enhancing the FSA’s credible deterrence strategy, using its new powers of intervention and enforcement.
Hector Sants, FSA chief executive, said:
“Trust in the financial services sector is at an all time low and the new regulatory arrangements provide the opportunity to restore confidence in an industry which has generated in excess of £15bn detriment over the last two decades.
“This document sets out the approach the FCA will be taking to improve regulation, a key element in restoring trust in the industry.
“For the FCA to be successful it must have the support of society and Parliament, and its objectives and approach must be clearly understood by all.
“The document is designed to stimulate debate on the key questions to be resolved, which includes finding the right balance between the benefits of early intervention and the consequent risks of reducing choice and raising costs, and also clarity regarding the balance of responsibilities between consumers and industry.
“The FCA’s proposed approach moves the calibration of these questions in favour of more intervention but the question which needs to be answered is whether society is happy to accept the resultant costs and potential reduction in individual freedom.”
Margaret Cole, interim managing director of the conduct business unit, said:
“We will now press on with developing our thinking on how to implement the approach set out in this document. We are clear that this will require significant investment, building on and improving what the FSA has achieved so far. I am confident that, if implemented, this approach will deliver significantly higher levels of protection than consumers have enjoyed over the last 20 years.”
At this early stage in the development of the new regulatory structure, the publication sets out the approach the FCA plan to take and raises issues that need to be considered by industry, legislators and consumer representatives. This open debate, seeks to find consensus on the type of regulator needed to restore customer trust in a sector which has generated billions in consumer detriment due to mis-selling scandals.
The FSA would welcome comments on the approach document by 1 September 2011.
Notes for editors
Under the Government’s plans, the UK’s new model of regulation will see the responsibilities of the FSA split between two new bodies. The Prudential Regulation Authority (PRA), will be a subsidiary of the Bank of England, and will supervise deposit takers, insurers and a small number of significant investment firms. The FCA will be responsible for regulating conduct in retail and wholesale markets, and will operate with the single strategic objective of protecting and enhancing confidence in the UK financial system.
The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; securing the appropriate degree of protection for consumers; fighting financial crime; and contributing to the protection and enhancement of the stability of the UK financial system.