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ABI urges FSA not to over-regulate products

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The Association of British Insurers has urged the FSA to not introduce “further radical interventions” in product regulation in response to its recent discussion paper.

In its response, the ABI says that the FSA should not “introduce further radical interventions which risk stifling the market and restrict consumer choice”.

The ABI says that instead the FSA should focus on more effective, proactive and consistent supervision and enforcement of existing rules that underpin the core principle of treating customers fairly.

This will address any developing market failures and increase consumer confidence in the industry.

In January, the FSA launched product intervention discussion paper that outlined it could force advisers to take further qualifications when advising on specific non-mainstream products it fears could lead to poor customer outcomes.

ABI director general Otto Thoresen says: “We want to see a balanced risk based regulator which oversees a market which delivers positive outcomes that meet consumer needs and expectations. This will only be achieved by maintaining a healthy level of consumer choice and market competition.”

He adds: “Meeting this objective requires the Government and the regulator to recognise the inter-connectivity of a series of initiatives that form part of an overall package of reforms at both the UK and EU level. Any major change should not occur in isolation, but has to fit with the whole suite of existing and planned regulatory developments.”

Thoresen says that the FSA product intervention paper is not “well-placed” within the wider regulatory reform context and so the FCA should take a “holistic view that is focussed on delivering good consumer outcomes.”

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. Given the functions of the Office of Fair Trading which has been in existence sice the early 1970s and the Bank of England who needs the FSA or any organisation for that matter that costs the tax payer a fortune with little to show for it and a culture that inhibits entrepreneurs? I have already written to my M.P. for Southend West David Amess who in turn has passed it on the Treasury.

  2. Fat chance of the FSA listening to the ABI, or anyone else!

  3. Did you know that an anagram of Sheila Nicoll is..

    In social hell?

  4. And that one for Clive Briault is Viral Tub Lice?

  5. On balance, I am in favour of the FSA being empowered to weed out potentially toxic products at an early stage in their life cycle or to clamp down on inappropriate selling practices of products suitable only for a limited category of investors.

    As always, though, the key consideration is how such powers would be framed, exercised and, of course, regulated. If the application of such powers were to be triggered by reports from various quarters of the industry that certain products warrant close regulatory scrutiny and if the FSA could be relied upon actually to act on such reports, then this might actually be a useful step forward.

    The trouble is, though, that the FSA appears to have failed to act on information in its possession as long ago as 2007 in respect of certain KeyData products, and look what happened as a result of that. Also, the FSA hardly acquitted itself with honours over the way in which it handled the Barclays/Aviva debacle.

    Therefore, whilst such a proposal seems to me to be sound in principle, it would probably fail for the simple reason that the FSA couldn’t be relied upon to do what would be required of it. And so the mess of Systemic Regulatory Dysfunction continues.

  6. Melvyn – The FSA doesn’t cost taxpayers anything, they’re funded by the industry.

    Think back to PPI. Would the FSA (or anyone else) have looked at it on paper and said it was a bad product and should be banned? No. It’s a protection product which can meets the needs of those who a) qualify for it and b) find themselves in a specific situation. It’s the sales processes that let this product down. Rather than product intervention, the Regulators should be concentrating on how products are sold & who they’re sold to.

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