Regulation  

FCA stuck between a rock and a hard place

In terms of popularity the financial services industry and its associates have seldom covered themselves in glory. In the 1980s and 1990s surveys suggested that life assurance salesmen and estate agents were vying with car salesmen for the bottom of the pile. In the following decade it was bankers who swept them all aside to assert their newfound social status as the lowest of the low.

With the accessibility of today’s technology everyone has the opportunity to air their views publicly. Sometimes it seems that a significant, albeit in the main unidentifiable, proportion of the once silent majority has found its voice. Anonymous trolls and ranters are out mixing their frequently wholly malign, often self-important mischief, with the rather more considered, often witty and constructive insights of more measured critics.

As a regular reader of the trade press, not just the editorial but the subsequent comments it inspires, I occasionally feel that the regulator is caught between a rock and a hard place, damned if it does and damned if it does not. Is this the inevitable and perpetual fate of all those in authority? Indeed how can the FCA be so different from its predecessor when many of those working for it were formerly employed by the FSA?

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Martin Wheatley, chief executive of the FCA, sees it as “a very different animal”. Certainly he is determined that the new regulator should not just be efficient and effective, but be seen to be a forward-looking, preventative body. For this reason the FCA has made clear that it wants to work much more closely with the industry than its predecessor.

Sceptical readers may have their reservations but the new regime recognises that if it wants to implement a more judgement-led philosophy, one that enables it to pre-empt, to act more swiftly and intelligently and avoid crises down the line, it is going to have to collaborate far more with industry practitioners. After all these are always going to be the people with their finger on the pulse.

Listening to those in the know means that even if the regulator itself does not always identify what is going on, consumers and whistle-blowers will. For behind the theory lies the premise that eventually consumer demands can become the real drivers of flourishing and competitive markets. Firms that put the consumer first will be the ultimate beneficiaries while those that fail that test will fall by the wayside.

The FCA has also focused on carrying out a lot more upfront reviews as it is only by consulting the people who have the necessary experience, knowledge and understanding of how the financial services industry’s products and services operate in reality that it will have the wherewithal to fulfil its own demanding brief.

The new board has made much of its intention to be far more consumer-oriented, and while this may seem obvious, the FCA has also acknowledged the importance of gaining a thorough understanding of what good consumer outcomes are. Similarly there is much work still to be undertaken on the definition of good practice. This is therefore a regulator that sees its responsibility as not merely embracing product monitoring, in which all the compliance and legal boxes are ticked, but one that recognises the need to assess the appropriateness and effectiveness of those consumer outcomes. Alongside this it also wants to be reassured that the market is sufficiently competitive and that the ongoing fair treatment of consumers is at the heart of every organisation’s business culture.