FSCS cross-subsidies remain crucial, says Aifa
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Aifa has argued that the cross subsidisation of providers as part of the Financial Services Compensation Scheme “remains crucial” to consumer protection.
The Government published a consultation on financial regulatory reform today which suggests that cross-subsidies for different classes of levy payers may come to an end.
This is because the Consumer Protection and Markets Authority and the Prudential Regulation Authority, to be formed under the new regulatory structure, may each be given the power to draw up rules relating to compensation and levies for the firms they regulate.
The government says this would imply separate compensation schemes for the two bodies, and therefore the ending of the current cross-subsidy system.
In Aifa’s response to the paper, director of policy Andrew Strange says: “The proposed changes to the FSCS are an interesting development given the current review of the funding model of the scheme. There are also three separate European directives or papers that impact on this area. While SMEs paying for bank defaults is entirely inappropriate, cross subsidisation of providers in cases of product failings remains crucial in providing a safety net for consumers.”
Aifa has also expressed concerns that with the CPMA being billed by the Government as a “consumer champion,” the idea of consumer responsilibity has been moved down the agenda.
Strange adds: “We have supported Mark Hoban’s recent comments on consumer responsibility, but are concerned that the term consumer champion for the CPMA detracts from this important objective. We must be clear about the responsibility of all market participants in financial transactions.”
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Readers' comments (3)
paolo standerwick | 26 Jul 2010 4:59 pm
I pointed this out much earlier re the comments about consumer champion. This will continue to lead to bogus claims which we cannot do anything about as FOS (or future CPMA) do not recognise fraudulent claims by consumers.
Funny how the ABI did a report a while back on the widespread fraudulent claims for general insurance, but when it comes to financial services they, and the regulator turns a blind eye!
Abusive and dodgy claims will continue whilst clients can place claims fro free and with no recourse.
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Julian Steve3ns | 26 Jul 2010 5:26 pm
I'm old enough to remember when there was no financial services regulation at all beyond that of UK Law.
There was no FSA, no FOS, no FSCS or any of those costly quangos. No TCF (we just did it or lost them to a rival), no (mandatory recording of) CPD (but we knew we had to stay informed, otherwise we'd lose business to better informed rivals), no T&C, no KPI's (if you didn't do the job properly, you failed and were out). People such as those who perpetrated the Barlow Clowes fraud were dealt with by the courts and sent to prison for a good few years.
Those who wanted to take exams were free to do so, but those who didn't weren't ostracised by their colleagues, much less threatened with confiscation of their livelihoods by some unelected bunch of know-it-all bureaucrats
in the East End.
Reflecting on 20+ years of monumentally costly but appallingly biased and corrupt regulation, the number of mandatory procedures introduced to what we as IFA's do, important though they are, aren't actually very great in number. Basically, they boil down to a proper FactFind, a record of the research on which you've based your advice, a written record of said advice and maintenance of an orderly file long term. There really isn't that much more to it when you think about it, is there?
And yet, in 2010, in what state is the financial services industry? Overall, weaker, more beaten up by (and resentful of) its regulators and generally punch drunk than at any time in its history. Public confidence in the industry is at an extremely, possibly all time, low ebb and many IFA's who have served their clients with diligence and integrity for 20+ years just want to get the hell out.
Tell us, Hector ~ where did it all go wrong? Or don't you yourself even know?
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Robert Donaldson | 27 Jul 2010 9:38 am
I agree totally with the above comments by Julian. All the changes of the last 21 years have brought about a consumer who is less informed, thinks they have no responsbility for their own actions, is less insured, less pensioned and less protected than in the past when everything was supposedly so bad!
Time to turn the clocks back a little I think and get rid of the constant change and constant bureaucracy that stops the average man in the street being more financially protected.
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