The chief executive of the Financial Conduct Authority has dismissed the idea that the regulator should be responsible for making the UK more competitive through light-touch regulation.
In a speech at Bloomberg's London headquarters today (April 23), Andrew Bailey said he was often told the FCA should have an objective to ensure UK financial services were competitive globally.
But he said: "The quick retort to this point is to recall that, before the financial crisis, the Financial Services Authority was required to consider the UK’s competitiveness, and it didn’t end well for anyone, including the FSA.
"True enough, but I don’t think the issue ends there. The test of any objective for a regulator [...] is that it must meet the public interest. The rising tide lifts all boats approach pre-crisis failed this test.
"So if we are going to have the competitiveness debate, let’s please have it in a public interest framework that does not entrench the interests of incumbents."
Mr Bailey went on to discuss the way the FCA regulated the financial services sector, and he acknowledged “a strong desire” from the industry to see the regulator strengthen its principles and "use them to much more real effect".
He said he had sympathy for this desire and added: "History has shown a tendency to talk principles but write rules, amongst the regulator and regulated alike. But principles are not debating points, they are the bedrock of our regulation, and there is a good case for enhancing their standing and practical impact.
“This would also help us to ensure that the scope of regulation can adapt to the changing environment in which we operate."
The concerns were part of a discussion paper on the case for introducing a duty of care on authorised firms,
According to the FCA, industry professionals felt the existing set of principles and rules were sufficient and imposed the same requirement on firms as a duty of care would.
In addition, the Senior Managers and Certification Regime was highlighted as an important new tool which “should be given time to prove its worth”.
Mr Bailey said: "For one side, a duty of care would trigger a fundamental change within firms, moving them to ask, ‘is this right’, rather than, ‘is this within the rules’?
"It would create clarity for consumers about what they can expect and/or demand of firms, and articulate a single, overarching concept of care, which would help rebuild consumer trust."
He added: "For the other side, a duty of care would be difficult to apply to the wide variety of firm-consumer relationships in financial services, not to mention the challenge of developing a wide body of legal precedent in sufficient time.
"They also point to the loss of regulatory agility and adaptability if the courts take a larger role, the risk of duplication and confusion of existing obligations, the challenges of litigation for consumers and the potential stifling of innovation and access."