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Adam Smith Institute calls for FCA to be scrapped

Eamonn Butler Adam Smith Institute ASI thinktank
Eamonn Butler, director of the Adam Smith Institute

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.”


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

  1. Derek Bradley ceo PanaceaIFA 13th July 2012 at 9:03 am

    I am sure many will share this view but I would caution and say, be careful what you wish for.

    Especially given the oft stated FOS mantra of making the law.

  2. Lawlessness rules?

  3. Financial services was / is a huge earner for UK Ltd but has / is / will be strangled by UK / EU regulation. The result is the killing of the goose that lays the golden eggs. Govt has given over the reigns of regulation to an incompetent Quango with no accountability which has misinterpretated it’s function. It’s mantra now is to regulate not by improving standards but by ceasing the ability of customers to have access to financial products and planning. ie keep death off the roads – cut off the petrol supply, cars will run out of petrol, cars can’t operate – mission accomplished.
    Govt won’t listen to their own TSC and instead prefer to ‘fiddle whilst Rome burns.’ the FSA know they are wrong but have set their rudder and will not adjust to save face.

  4. Common sense, but alas there are too many highly paid manderins that will not allow that happen.
    Eamonn Butler for prime minister 🙂

  5. Judgement based regulation eh? Whose judgement and what experience will these judges have?

    I could see 2 IFAsin the same street doing the same thing and one being told they are exemplary and the other charged with misadvice,

    Consistency will be difficult

  6. Never before ,has so much been cocked up by so few for so many, at such cost for so little.

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