The FSA has published a speech given by Jon Pain, Managing Director, Retail Markets, FSA. The speech is entitled Restoring Confidence & Trust.

Jon Pain (JP) begins his speech by stating that the financial services sector appears to lack a focus on consumer needs when compared to other industries. He also mentions that product innovation has led to more complexity and a focus on profitability, rather than a clear unambiguous focus on consumer needs.

He then covers the following issues:

  • Improving the financial capability of consumers. JP states that the FSA's consumer capability programme has two main streams: (1) Financial capability which is aimed at working towards better informed, educated and more confident consumers, who are able to take greater responsibility for their financial affairs and play a more active role in the market for financial services. (2) MoneyMadeClear which delivers guidance on money matters face-to-face, over the phone and online.
  • The FSA’s thoughts on product regulation. JP states that the FSA will approach product regulation with an open mind in the future. The FSA sees the term 'product regulation' as encompassing a whole spectrum of possible measures. It can be about pre-approving and banning products or alternatively setting parameters or constraints around certain design features.
  • How the Retail Distribution Review (RDR) is aiming to restore consumer confidence in the investment industry. JP states that the RDR applies across the market place not just to distribution. The formulation of the proposals is only one part of the process, the FSA is now looking to the financial services industry to take action and translate the proposals for implementation. JP calls on the financial services industry to redouble its efforts, assess the implications of the FSA’s proposals, and begin the transition so that they will be in a position to comply with the new requirements by the 2012 deadline.

JP also briefly discusses Solvency II. He states that the Directive includes all the building blocks that the FSA believes are central to a sound prudential regime for insurers, including placing strong risk management at the heart of the regime, supported by robust capital requirements and an objective, economic basis for the valuation of assets and liabilities.

However, he does accept that the Directive also poses a significant risk and notes the potential impact of Solvency II on annuities in the pension market. JP also confirms that the FSA supports the existing concept of the liquidity premium.