“For example, the recent platform market study [the interim report of which was published in July 2018], the non-workplace pensions discussion paper [February 2018], and the asset management market study final report [June 2017] are very much being led by the competition team at the FCA with its own approaches as to what it sees as working well, or not working well or providing good outcomes.”
However, Hugh Savill, director of regulation at the Association of British Insurers, says the FCA’s approach to competition is “so close to regulation it does not make any difference”.
Mr Savill says: “There is not much difference between the FCA’s competition-led market studies and its old-style thematic reviews. It could seem a bit of a muddle. The latest market studies state they are about competition, but really they’re a mix of that and regulation.
“Consider the recent platform market study and the work on add-ons in general insurance. These are presented as competition studies, but include a lot of the remedies one would associate with a purely regulatory stance.”
A balancing act
If it is happening, is a shift towards competition rather than direct regulation necessary – and does it confuse what the regulator is trying to do with what the market itself should do?
There are past examples of the watchdog adopting a more hands-on process. Back in 2013 and 2014, when the FCA and sister organisation the Prudential Regulation Authority were looking at opening the banking sector to more challenger banks, a more interventionist approach was welcomed.
In December 2017, the FCA’s policy statement, ‘Information about current account services’, showed the regulator intervening in the provision of current accounts, with new rules designed to improve competition and to promote easier account switching.
The watchdog’s direct approach to promoting financial technology has also garnered praise. Mr Savill calls its Project Innovate and fintech sandbox “the jewel in the FCA’s crown – an excellent thing for a conduct regulator to do”.
Clearly, intervention can go hand-in-hand with promoting competition. But some market participants think the regulator is already verging on doing too much.
Rob Sinclair, chief executive of the Association of Mortgage Intermediaries, expresses concern about the mood of recent market studies. He says: “We have always been concerned the FCA has not clearly articulated how it will apply the competition brief it was given.
“Is it the job of the regulator or the market itself to bring in better choice? I think the FCA should only intervene where there is clear consumer detriment.”
This line of thinking is not met with agreement from all comers. Consumer champion Mick McAteer is also worried the balance is not quite right between regulation and encouraging competition – but he would like to see greater, direct intervention rather than just expounding the benefits of competition and choice.