Consumer advocates in Britain are heralding the creation of a new financial regulator Monday, the Financial Conduct Authority (FCA), as part of a response to regulatory failures experienced during the financial crisis.
The Financial Services Consumer Panel, which is a statutory body in the UK mandated to represent consumer interests, “strongly welcomed” the introduction of the FCA.
The FCA is being created out of the UK’s Financial Services Authority (FSA), which had championed lighter touch regulation in the years leading up to the crisis. The new FCA focuses entirely on firms’ conduct, with the FSA’s prudential responsibilities spun off into another authority.
The Consumer Panel said today that it “believes that the FCA has the powers needed to introduce an era of more effective regulation as its operational objectives give it a strong consumer protection mandate.”
As a result, the panel is expecting: a “renewed and meaningful focus” by the FCA on ensuring the industry treats its customers fairly; higher penalties to remove firms’ incentive to engage in practices that damage consumers, and to act as a clear deterrent; greater use of analytical resources, rule-making and enforcement powers to promote effective competition; a commitment to ensuring access to financial services; and, more effective prioritization, so that the new regulator is not overstretched and can focus on key emerging risks and the root causes of consumer detriment.
“It has taken three years to translate the government’s ideas on regulatory reform into the reality of the new FCA. With its enhanced consumer protection mandate, we expect the FCA to build on the FSA’s recent work and introduce an era of effective consumer protection,” said Adam Phillips, chair of the panel; adding that it is already encouraged by “bold statements” from the FCAs CEO, Martin Wheatley, and the new organisation’s “commitment to taking a more forthright approach to regulation.”
Last week, upon appointing the new FCA’s board, Financial Secretary to the Treasury, Greg Clark, said, “The financial services industry is integral to the success of the UK; it supports economic growth and our society as a whole. The new Financial Conduct Authority will exist to rebuild trust and confidence in the sector, through a renewed and proactive focus on conduct regulation.”
“Financial services are an essential part of modern life. Experience has shown that robust regulation is needed to ensure consumers get a fair deal. The FCA has the powers to make a real difference to consumer protection,” added Phillips. “The panel will be watching its progress closely and urging it to ensure consumers get a financial services industry that acts in their best interests.”