Can the FCA transform regulation following FSA disaster?
The FSA’s past performance has been an unmitigated disaster - hope now rests with the FCA.
Come on. Hands up. Who thinks the FSA has been a resounding success story, leading to a consumer-friendly financial services industry and a thriving independent financial adviser sector delicately and sensitively regulated? I see no show of hands.
I am not surprised by your negative response to my question. Whichever way you look at the FSA (upside down, back to front, inside out) it has been an unmitigated disaster.
Despite splendidly sounding initiatives such as ‘treating customers fairly’ (a bank treating a customer fairly? Come on), the posturing of former boss John Tiner and the quiet fortitude of his successor Hector Sants, and a string of eye catching fines, the FSA has served the public poorly over the years. Very poorly.
It is developed into an unwieldy, bureaucratic organisation capable of nothing more than overly tardy reactive regulation. Time and time again, it has failed to spot potential mis-selling problems. The result is that mis-selling issues that could have been nipped in the bud have grown into horrible scandals that have scarred the public’s trust in financial services. I would contend the FSA has done as much to decimate consumer confidence in pensions, investments and insurance as the big bad banks. Do you agree? Hands up.
I would contend the FSA has done as much to decimate consumer confidence in pensions, investments and insurance as the big bad banks
Martin Wheatley, managing director of the FSA and the boss in waiting at the consumer-focused Financial Conduct Authority, admitted as much earlier this month when he confirmed a crackdown on the incentive schemes banks use to get branch staff to sell high commission, low grade financial products – everything from nasty payment protection insurance through to toxic precipice bonds.
“We, as the regulator, intend to change this culture of viewing customers simply as sales targets and I am going to be personally involved in getting this right,” he said. “This bonus-based approach has played a role in many scandals we have seen over the years. Incentive schemes on PPI were rotten to the core and made a bad problem worse.” He then proceeded to tell the world what he intended to do to remove the curse of sales incentive schemes – more fines, more rules and more supervisory work.
All these words are fine and dandy but are they not a little bit too late? Closing gates after the horses have bolted springs to mind. Bank staff have been thrusting inappropriate financial products into the hands of confused customers for years, the severity of the thrust determined by the size of pay bonus available.
So, why, in the name of regulation did not the regulator do anything about it? Yes, it has issued numerous fines for mis-selling (precipice bonds, investment bonds and payment protection insurance) but it is never had the gumption or determination to eradicate the incentive schemes that were the source of the mis-selling. Sticking tape has been applied when more radical invasive surgery was required by the FSA.