Aifa hits out at FSA over capital requirements

Speaking at the Financial Services Authority conference this afternoon, Chris Cummings, director general of Aifa, said he did not agree with the proposals and said that adviser firms feel "trampled upon" by the regulator.

"Firms feel let down. They feel the bar for IFAs is being lifted in excess of everyone else in the financial services industry."

Through the RDR, the FSA is proposing that all firms - small and large - double their capital adequacy requirements to £20,000 by 2012.

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However, Cummings said this requirement was totally unusual when compared with financial services across the rest of Europe.

Cummings slated the proposal, which he said was dreamt up in "the shiny towers of Canary Wharf" but in reality such capital would be difficult to come by, given the current economic environment.

"Where is this capital going to come from, the banks?" he said.

"We are the sector that poses the least threat and to be told to increase capital by this amount is ludicrous.

"We are struggling to understand the good that is trying to be done here. I’m afraid it’s just not good enough," he added.

Dan Walters, director of retail policy and conduct risk at the FSA, however, defended the decision and said that it was necessary to improve the industry.

"With large client exposure in a sector that has as history of problems, we don’t think it’s unreasonable to look at this."

"There are some businesses with tiny capital bases where adjustments must be made," he added.