British Financial Services Authority calls for more consumer orientation
In the context of a speech at the Chartered Institute of Bankers in Scotland Martin Wheatley, Managing Director of the Financial Services Authority (FSA), explained that while policy makers and firms had learned the lessons from the financial crisis on the prudential side of banking, this was not yet the case on the conduct side.
He also said that the FSA was currently revising its approach to supervision. This approach will be adopted by the Financial Conduct Authority (FCA) which will replace the FSA next year.
More emphasis will be put on understanding why people make mistakes and why firms do what they do. Hence the FSA was looking at consumer behaviour, and business models in firms to inform the new, more forward looking and intrusive approach to supervision.
In this the FSA will recognize that firms need to be able to generate acceptable returns. But firms should generate ‘good profits’ rather than profits at any cost.
Furthermore, he articulated the expectation that also those in executive management and on the boards of firms will step up their engagement with the conduct side of business. It was to ask why boards of banks did not ask the management of firms about how things like PPI could be so profitable - 15 percent of some bank’s profits - and still deliver the fair treatment of customers.
More information: www.fsa.gov.uk/library/communication/pr/2012/048.shtml