Context
Charles Randell, Chair of the FCA and PSR, gave his speech at the Centre for Commercial Law Studies, Queen Mary University of London. This speech appears free of recent repeated FCA political-style rhetoric and is direct and relevant in its approach.
Key points to note
Highlights:
- The consumer’s voice needs to be front and centre in UK financial services regulation and in every Boardroom.
- Policy partnerships between Government and regulators are crucial to deliver good outcomes for consumers.
- It is essential for the Future Regulatory Framework to follow the Government’s stated aims of respecting the FCA’s independence and primary objectives, to ensure that the financial services industry continues to act in the interest of all people and communities of the United Kingdom.
The speech is split into the following eight sections:
You are who you meet – face to face meetings with individual businesses and customers can add faces and personal stories to the issues which the FCA has to tackle. They bring purpose and urgency to the FCA’s work. Most of all, they show the gap which often exists between people’s real-life experiences and the liberal theories that have shaped financial regulation.
An independent regulator for the whole of the UK – listening to the users of financial services across the UK – particularly consumers and small businesses, whose voices may not be as loud as others – is an essential part of balanced and effective regulation.
Importance of partnerships – People need to be able to understand the decisions they have to take about spending, borrowing and saving and be confident to make them. People need support to avoid problem debt, need access to broadband and devices in a world where more and more services are only online, and people need incentives to use suitable financial products, and protection from fraud and scams.
Importance of policy coherence – a number of examples are given setting out where clearer and more coherent policy decisions could have led, and could lead in future, to better protections and outcomes for financial services consumers in the UK; a strong and independent financial conduct regulator is required to be able to achieve that.
Future Regulatory Framework – the Financial Services and Markets Bill will be debated in Parliament in the coming months. It will make significant changes to the relationships between the Government, Parliament and the financial regulators. Changes are needed, because the power to make some financial regulations is passing to the regulators, when previously it sat with the EU institutions, with accountability through the European and national parliaments. So, it is important that Parliament has more effective oversight of the FCA’s work. The independence of the FCA not only makes it more effective domestically, but is also a crucial part of its global reputation, enabling it to play a leadership role in the international standard-setting process.
Growth and competitiveness objective – the speech comments on proposals in relation to the FCA and getting it more involved in facilitating growth in the UK economy. Randell very much welcomes the fact that the proposal on which the Government has consulted would be clearly secondary to the FCA’s three primary objectives; Government has stated that it is ‘very clear that this new objective must not conflict with the regulators’ primary focus: the need to ensure safe and sound firms, well-functioning markets and to protect consumers and promote competition.’. Randell does not think that “…we can achieve long term economic growth if we put the interests of the financial services industry ahead of the interests of other people in our society.”
Government powers of intervention – the Government has also proposed taking new powers to intervene in the FCA’s processes. These include a power to direct the FCA to review areas of its rules and submitting FCA policy proposals to a new panel which would scrutinise in advance the cost-benefit analysis which the FCA already undertakes. The risk that the Government and Parliament need to guard against is creating a strong channel for lobbying by vested interests who want to bypass the FCA’s public interest objectives of protecting consumers and promoting competition, using politicians to get the rules changed in their favour. In the current framework, the FCA as an independent regulator with a strong consumer focus provides the balance that is needed to reduce the risk of lobbying and interference. The Future Regulatory Framework must preserve that balance and reinforce the ability of Parliament to play its role in holding regulators and the Government to account.
Next actions
We have included this item for information and awareness, but this speech sets out a balanced view of what a modern financial services conduct regulator should be.