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Aim is to get best deal for public

2001 has been a busy year for financial services. Most not-ably, the FSA became the single regulator of financial services at the end of November.

But another important development was DeAnne Julius&#39 independent review group&#39s report on the banking and mortgage codes. This identified ways to give the consumer a better idea of the service his or her bank is offering and to make it easier to use that information. I am pleased to say the industry has res-ponded constructively, accepting the majority of the recommendations and agreeing to further work on the remainder. Consumers will now benefit from faster account switching and better information.

DeAnne&#39s group also rai-sed the issue of mortgage advice regulation. It argued that the Government&#39s proposals for statutory regulation, which excluded advice and intermediaries, would not deliver adequate consumer protection. This is also the message I have been receiving from industry and consumer groups.

I asked my officials to look again at the issue in the light of these concerns, market developments and the FSA&#39s need to finalise its rulebook, and last week I announced that the FSA would also regulate mortgage advice.

Buying a mortgage is one of the biggest financial decisions most people are likely to make and high quality, understandable advice is crucial. In the rare and unfortunate cases when things go wrong, this can have very serious implications. I believe there would be significant benefits to the industry and to consumers from regulating the quality of advice and the qualifications of advisers. The change will ensure a high standard of advice is available across the board.

There will be benefits of streamlining regulation for brokers who already deal with the FSA for other lines of business. Under the original proposals, lenders would have been responsible effectively for controlling the sale of their products through brokers; FSA regulation of brokers will remove that burden from lenders.

Many mortgage brokers will also be brokers for general insurance. In parallel to the work on mortgages, we will be legislating to bring the sale of general insurance products into FSA regulation. As with mortgages this will bring benefits to the consumer and, coupled with the move on mortgages, will be a significant streamlining of the regulatory system that brokers face.

A small financial services company carrying out mortgage, general insurance, pensions and life business will have to deal with the FSA rather than a series of overlapping regulators including the FSA, the Mortgage Code Compliance Board and the General Insurance Standards Council as now.

It will also allow UK insurance brokers to take advantage of the European market that will be opened up by the Insurance Intermediaries Directive. This would not be the case without statutory regulation.

In developing its regulatory regime, the FSA&#39s watchword will be proportionality. The FSA&#39s statutory obligations would not allow it to impose a one size fits all burdensome regime even if it wanted to.

In order to maximize the benefits of streamlining, particularly to the smaller brokers, the aspiration is to coordinate implementation so that both mortgage and general insurance regulation come into force at the same time.

This announcement means that N3 will now not take place in August next year. Our ambition is to have the new regimes for mortgages and insurance fully in place by early 2004.

I would like to pay tribute to the MCCB and the GISC, both of whom have had considerable success in raising standards and increasing professionalism in the industry. The FSA will be looking to work closely with both bodies in setting up the new regimes, drawing on their skills and expertise in understanding the market and designing the system.

The Government needs to keep the regulatory framework under constant review. Our key aims are to ensure the consumer is able to get the best deal and to allow the UK financial service industry to grow. These new measures build on the work we have already done to empower and provide additional protection for consumers and will further simplify the regulatory environment for financial services business – particularly the smaller broker.


Ruth Kelly statement in full

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