Is The End In Sight For The FSA?
A trusted authority and tight financial regulation of financial services companies are at the forefront of financial news supplements of newspapers.
With the changeable worldwide economic conditions which continues to pound firms, economic dependability is the largest in buyers’ and brokers’ minds when deciding where to consign their business operations, stated a survey carried out by a Lloyd’s leading insurer.
As a result of the global financial markets failures, whereby some of the world’s biggest banks were brought close to ruin and rocked some insurers to their foundations, half of clients and over one third of brokers said that a carrier’s security and financial muscle was the vital aspect when choosing an insurer, disclosed in the survey conducted by QBE Insurance.
Her Majesty’s Treasury has arranged publication of a consultation paper entitled “A new approach to financial regulation: building a stronger system”. The consultation, that proceeds until 14-04-2011, provides outlines of plans for a shake-up of the regulations for financial services.
The consultation follows on from a statement from Mark Hoban (Financial Secretary to the Treasury), where he stated that FCA or Financial Conduct Authority will be the new name for the Consumer Market Protection Authority.
A fresh emphasis on regulatory compliance has come about from the overhaul of finance regulation following the credit crunch.
Her Majesty’s Treasury has censured the regulatory system established by the preceding Government, and the Coalition has made reform of financial regulations a priority since taking office. In 2012, the FCA and the Prudential Regulatory Authority (PRA) will change from the current FSA or Financial Services Authority.
The Government consultation says that there must be steps taken “to ensure that financial firms are never again allowed to take on risks that are so significant and so poorly understood, resulting in such severe economic consequences for businesses, households and individuals.”
The consultation declares that “conduct of business regulation has a fundamental role to play in protecting and enhancing that confidence in the UK financial system.” The stated objective is to build up the financial sector’s mind-set with respect to risk, and to check and enforce regulatory compliance with with more vigour.
Under the present regulatory formation, companies facing fines can avoid by petitioning the Financial Services Authority. In the future, though, the Financial Conduct Authority will have the control to bring to the public’s awareness news about businesses being investigated before an appeals process begins.
The FCA will also have the power to inflict a one year product sanction, cancel contracts that contravene its product regulations, and take confusing financial commercials off the air.
As such, the proposed transformations to the regulatory structure are, theoretically, as much about looking out for customers as shielding the standing of the UK financial system or advancing competition. How these new powers will be exercised is what remains to be seen.
