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FSA approach to regulation was flawed, says Wheatley

The chief executive of the FCA addressed delegates at a recent conference held by the Association of British Insurers in London and said: “Too much of what went before in regulation, both in the UK and abroad, was based on implausible economic assessments.

“We know that was a false paradigm. Looking back now, we can see this approach to regulation was flawed. It was too simplistic and inflexible. It left too many questions unanswered.”

Mr Wheatley said it was clear that the FCA was a “very different animal” from the FSA, adding: “Not only do we have a new overarching objective to make markets work well, we also have new powers and a philosophy to be forward looking and forward thinking.

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“I want to make it clear that the first 100 days of the FCA are a bellwether of things to come. It is lasting change, as opposed to the firework that peters out and falls to earth.

“Good regulation is not a zero-sum game. We each have a vested interest in making markets work well for all participants.”

Reaction round-up

Tony Rawlins, senior manager of accounting and consulting network Moore Stephens, said: “Fair treatment of customers and ensuring market integrity clearly remains at the heart of the FCA’s objectives, with supervisory work focusing on market trends, business plans and product innovation. The regulator’s pre-emptive approach to tackle consumer detriment and poor outcomes will also look to see how firms use behavioural economics and apply competition to determine what interventions would be appropriate by them.”

Monica Gogna, partner specialising in financial services regulation for law firm Pinsent Masons, said: “The focus is now very clearly on the customer. Some may dismiss this as being populist, but Mr Wheatley knows from his days in charge of the Hong Kong regulator that even the most sophisticated financial products have implications for the man in the street if they go wrong.”

Steven Farrall, partner at Suffolk-based wealth manager Williams Farrall Woodward, said: “The very fact that Mr Wheatley thinks a bunch of bureaucrats has the knowledge to have a vested interest in making markets work well demonstrates the utter bankruptcy of the FCA’s position. It also demonstrates an absolute ignorance of markets and how they work. The whole construct is complete and total poppycock, and the very existence of the FCA is a zero-sum game.