The FSA has published a speech given by Hector Sants (CEO, FSA) entitled UK Financial Regulation: After the Crisis. The FSA has also published a summary of this speech in a press statement entitled FSA CEO outlines new conduct regulation strategy - consumer protection through early intervention.
In his speech Sants states that the FSA’s consumer protection strategy seeks to achieve three goals:
- Making the retail market work better for consumers.
- Avoiding the crystallisation of conduct risks that exceed the FSA’s risk tolerance.
- Delivering credible deterrence and prompt and effective redress for consumers.
Sants argues that the new strategy signals the end of ‘reactive regulation’ where, previously, the FSA waited for clear evidence that a product had been mis-sold and consumers harmed before it took action and relied principally on risk disclosure information at the point of sale to avoid mis-selling occurring.
According to Sants the mechanism for achieving this strategy has three parts:
- Seeking to improve the long term efficiency and fairness of the market. This builds on recent initiatives such as the Mortgage Market Review.
- Delivering intensive supervision of firms. The FSA will intervene earlier in the development of retail products and such interventions will involve it making a judgement on potential detriment which will based on sound business model analysis and integrated firm-risk assessment.
- In the event that failure has occurred the FSA will secure an appropriate level of redress and compensation. It will also achieve effective credible deterrence by taking tough action against firms and individuals who have transgressed.
The new strategy will involve an integrated model of risk analysis and research which will see the FSA making judgements on firms’ decisions and actively intervening in product design. The FSA will also be more willing to test outcomes through mystery shopping and on-site visits. The FSA will also improve the framework and delivery of redress to consumers, starting with a review of the complaint-handling standards of all the major banking groups.
View UK Financial Regulation: After the Crisis, 12 March 2010