Today the new British Financial Conduct Authority commences work. Under the UK Government’s plan, financial services regulation is now split between the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA). While the PRA will be a subsidiary of the Bank of England and supervise deposit takers, insurers and a small number of significant investment firms, the FCA is responsible for protecting consumers.
The FCA’s objectives are to protect consumers, ensure that the financial services industry remains stable and that competition is promoted. To achieve these objectives, the FCA has rule-making, investigative and enforcement powers.
In their regulatory activities and in supervising the 26,000 financial firms, firms will be supervised differently depending on their size and the nature of their business. This includes:
- continuous conduct assessment for large firms and regular assessment for smaller firms
- monitoring products and other issues to ensure firms play fair and don’t compromise consumer interests
- responding quickly and decisively to events or problems that threaten the integrity of the industry
- ensuring firms compensate consumers when necessary
To do this a risk management system was developed and mystery shopping will be used as a method to uncover market failures.
The UK consumer organization Which? applauds that the FCA will take a tougher approach to regulation of the financial sector. Which? criticises that the FCA would have to learn from the mistakes of the past and succeed where the FSA – the predecessor organisation – did not. In particular Which? calls upon the FCA to:
- tackle bad banking culture
- stand up to the banks and promote competition
- be open and act on problems before they spread
Richard Lloyd, Which? executive director concludes: “Light tough regulation didn’t work. You have the chance to make a big change in banking, where the customer comes first, not the bank.”
Further information: http://www.fca.org.uk/ and http://www.which.co.uk/documents/pdf/open-letter-to-fca-pdf-315509.pdf Source: FCA and Which?