Regulation  

Tyrie to question FCA on RDR implementation

The Treasury Committee is set to question the Financial Conduct Authority next year on the post-implementation findings of the Retail Distribution Review, to ensure that the expected benefits of the regulatory reforms flow to consumers.

Yesterday (16 December), the Financial Conduct Authority published several papers, including its post-RDR implementation review.

The review, conducted by Europe Economics, was generally very positive about the reforms, particularly the move to explicit fees and professionalism, however it said “more time will be needed” to see whether any improvements translate into better consumer outcomes.

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It added that the RDR has led to improvements in information disclosure, but argued consumers are still confused over charges and the differences between independent and restricted advice.

Andrew Tyrie, chairman of the Treasury Committee, said: “The RDR is radically reforming the provision of financial advice in the UK. The banning of commission and the introduction of a clear market price were welcome steps towards reducing consumer detriment – essential given recent mis-selling episodes.

“The review suggests that there is little evidence that the availability of advice has been reduced significantly as a result of the RDR.

“However, concerns over consumer choice and competition remain. There has been a substantial fall in the number of advisers – from around 40,000 in 2011 to 31,000 in January 2014. The Treasury Committee recommended a delay to try and get this right but the regulator rejected that proposal.

“These reforms will need to remain under review to ensure that the expected benefits flow to consumers. The Treasury Committee will want to discuss this issue with the FCA next year.”

Yesterday, Mr Tyrie also welcomed the results of the Bank of England’s inaugural stress test of the UK banking system, calling it an important test of judgement-based regulation.

The Co-Operative Bank was the only lender to fail, although Lloyds Banking Group and Royal Bank of Scotland were told they could be at risk in the event of a “severe economic downturn”.

He said: “It is extremely regrettable that a similar exercise wasn’t done before the crisis. This process must be robust and transparent if it is to command the confidence of the public and markets.

“The extreme scenario used by the Bank might seem unlikely but they are right to use it. It is crucial that the banks have capital buffers in place to meet such shocks.”

donia.o’loughlin@ft.com