Adam Smith Institute calls for FCA to be scrapped
The Government should abandon its plans for the “pointless” Financial Conduct Authority with consumer protection left to the Financial Ombudsman Service, the Office of Fair Trading and the Bank of England, according to the Adam Smith Institute.
A new report by the libertarian thinktank, Simple rules for complex systems: Streamlining the UK’s financial regulation regime, also calls for the Money Advice Service to be paid for by customers rather than through an industry levy, or else dismantled.
The FCA is set to replace the FSA next year. It will be charged ensuring markets “function well”. The Government says the FCA will operate a “judgement-based” approach to regulation in contrast to the FSA’s “box-ticking” one.
The report says the regulator should be scrapped and consumer protection left down to the Financial Ombudsman Service, the Office of Fair Trading and the Bank of England.
The ASI warns the Prudential Regulation Authority, set to oversee the “safety and soundness” of large financial firms, will be torn between making sure firms are stable and allowing them to fail. Instead it suggests cutting the PRA back and giving it the role of “sniffer dog” for the regulators in the Financial Policy Committee.
ASI director Dr Eamonn Butler says: “Our financial sector is vital, but Osborne’s plans will strangle it. We need more competition and transparency among banks and financial firms, not more bureaucratic regulation. We do not need endless inquiries, we need clear rules and clear punishments when they are broken.”
The £44.3m financial services industry levy in 2012/13 used to fund the MAS is a “fine example of Government spending other people’s money”, the report says, adding that “if customers are happy to pay for its services, that is justification for its existence in a way that a compulsory levy is not”.
The thinktank attacks the way the European Union was given so much power over financial regulation meaning that despite having the continent’s largest financial services sector, the UK is only one of 27 voting members determining the rules.
It says: “In a disgraceful piece of personal aggrandisement, Gordon Brown persuaded the French Premier [Nicolas Sarkozy] to attend his G20 summit in 2009, by acquiescing to the French-led proposal that EU financial regulation should all be transferred to Brussels, and not separately conducted by member states.”