FCA to focus on competition and communication
The UK financial services sector has asked new regulator the Financial Conduct Authority to do more to support competition, improve its communication with the industry and provide clearer and more predictable regulation, according to a the results of a survey published by the FCA today.
The FCA began its life on 1 April 2013, when it took over from the now-disbanded FSA as part of a government reform to financial regulation. The Bank of England had made it clear that it wants to see more competition in UK banking, and the reforms to the rules are partly intended to facilitate that.
“From this last survey undertaken at the FSA, it is clear that firms believed there are some areas which could be improved,” said Martin Wheatley, chief executive at the FCA. “As the FCA, we have changed our approach and the way we regulate and we are becoming a more forward-looking, predictable and engaged regulator which acts from a position of greater understanding of the industry. We are also developing our approach to our competition objective. Our work with the Practitioner Panel will help us to develop these changes to ensure a well regulated financial services sector which gives consumers a fair deal.”
The survey showed that in 2013, 45% of firms rated their satisfaction with the FSA at 7 out of 10 or above, 38% rated the relationship between 4 to 6, while the remaining 16 rated themselves 1 to 3, representing extremely dissatisfied. The main complaints against the FSA were that it was ineffective due to its lack of forward thinking and its reactive rather than proactive nature. The FSA was also blamed for failing to prevent the financial crisis, and for failing to prevent mis-selling such as the PPI scandal. The Retail Distribution Review was also strongly criticised, as was the lack of experience of FSA staff.
Smaller firms were particularly concerned about the impact of regulation, especially firms affected by the Retail Distribution Review. Some 44% of non-relationship managed retail firms said the regulator at the time (the FSA) was not at all effective. In addition, 80% of firms identified clearer regulation as very important, while 65% emphasised the need for more staff with industry experience and more willing to give opinions (63%).
In addition, respondents to the survey indicated they were more confident in the FCA’s ability to protect consumers (70%) than in its ability to support competition (28%). When asked about the impact of regulation on their business, 32% said they were worried about being placed at a disadvantage compared with competitors abroad, while 20% are withdrawing from certain customer groups and market sectors due to regulation.
“With the FCA only a month old, these survey results provide important feedback on the expectations of firms for the new regulator,” said Graham Beale, chairman of the FCA Practitioner Panel. “It is in all our interests to have effective financial services regulation in the UK. The FCA has made a promising start, and the Practitioner Panel looks forward to working with the new FCA.”