View more on these topics

Banks fear new regulators will lack accountability

The British Bankers’ Association is lobbying the Government over fears that the new Consumer Protection and Markets Authority and the Prudential Regulation Authority will lack accountability.

According to the Telegraph, the BBA and many of the UK’s largest banks fear that scrapping the FSA will leave too much power in the hands of a small, unelected group that will not be required to explain their actions.

It says the BBA has put together a working group to formulate an industry-wide response to the Government’s proposals.

The Telegraph says while the FSA is required to hold an annual public meeting and regularly meet with senior industry managers through the Practitioners’ Panel, the CPMA and the PRA will not be.

There are concerns that the PRA will only be accountable to the court of the Bank of England, leaving too much power in the hands of a small group, led by the Bank of England governor Mervyn King.

BBA executive director Simon Halls says: “It is important that the new regulatory architecture takes into account the legitimate concerns of those who will be regulated about governance and accountability.”

Recommended

21

Why is Aifa opening up to restricted option?

Regular readers of this column will not be surprised to read that I have been a member of a trade union all of my working life. I first joined as a teenager many years ago and continue to pay my monthly subs today. The role of a trade union is relatively easy to understand. They […]

Boulger hits out at lenders over heavy footprints marring credit

John Charcol senior technical manager Ray Boulger has slam-med lenders for leaving damaging footprints on customers’ credit records when making a mortgage enquiry and believes this approach flouts FSA rules. He says: “Most high-street lenders – Halifax is an honourable exception – try to inhi-bit shopping around by leaving a hard footprint even when a […]

Check on DFMs’ use of alternatives

Advisers need to do thorough due diligence on discretionary fund managers and their use of alternative investments, warns Defaqto. In its new guide to alternative investments, Defaqto says more due diligence in relation to use of alternative asset classes is needed with discretionary management services than for multi-manager funds. It says multi-manager funds are more […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

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

  1. The truth is banks are worried that a new regulator will see them as they really are rip-off merchants.Most complaints are made against banks and the FSA just sits down and ignores the problem whereas IFA are screwed

  2. Alasdair Sampson 23rd August 2010 at 9:47 am

    The more things change the more they stay the same.

    So there are concerns that the CPMA may not be accountable to anyone. And that implies that the FSA is accountable? That’s news to me. To whom are they accountable?

    The FSA make the rules. They police the rules. They investigate breaches of their rules. They prosecute breaches. They sit in judgment. There is no appeal. So please someone tell me how that is the FSA being accountable?

    I am dealing with a number of FSA investigations of UCIS – the current bete noire – and all too often their investigators do not appear to read the IFAs’ files properly, they do not appear to understand their own rules and do not appear to apply them consistently.

    And all to often the FSA seem to have a predetermined outcome in mind and merely look for the evidence that fits the frame they have set, rather than follow the evidence to a conlcusion.

    Who provides objective independent oversight?

    No-one.

    So nothing will change.

    Are the FSA on your back? Contact me at alasdair@sampson-law.com.

  3. Now there’s an admission. What a flimsy reason they give.

  4. Alasdair Sampson’s post pretty well says it all.

    Whatever can have prompted these newfound pious concerns on the part of the banks? Since when did the banks ever give a toss about lack of accountability on the part of the regulator? How could the CPMA or the PRA possibly be less accountable than the FSA? All the banks have ever been concerned about is that the regulator basically continues to look the other way and leaves them to their own devices.

    It sounds to me much more like their real agenda is to block creation of the CPMA due to fears that the FSA’s manifest lack of accountability, its blatant favouritism of the banks and its statutory immunity from prosecution will, as a result of the now deafening clamour of dissent from the IFA community, all be done away with when the constitution of the CPMA is formulated.

    With luck and justice, the CPMA will be forced to observe the Statutory Code of Practice For Regulators, and it may also actually start to regulate the activities of the banks, exposing at last the Great Lie that banks offer advice as opposed merely to pushing products to meet sales targets.

    If and when that happens (though don’t hold your breath), the banks’ retail financial services operations may well be forced to change dramatically and, for the rest of us, very much for the better.

  5. Thats a laugh – are they saying the old regulator has accountability. In this case it may be better they devil you don’t know than the one you do!

  6. To comment specifically on Alasdair Sampson’s post, it is pretty appalling that the FSA’s investigators haven’t been trained to read (and presumably understand) properly a client file. How basic is that?

    And they don’t even understand the rules they’ve been sent in to enforce or apply them consistently. If the FSA’s own staff don’t understand its own rules or know how to apply them consistently, what hope is there for the rest of us?

    Surely, what this suggests is that the FSA’s rulebook is in need of drastic simplification rather than endless complication, not least so the FSA’s own staff can work out how to interpret and apply those rules. Sounds obvious doesn’t it? But, sadly, obvious doesn’t seem to a word in common regulatory parlance.

    As I have written before, the procedures for providing sound financial advice (at least sound financial advice leading to the sale of a product) are pretty basic, are they not?

    The foundation for everything, of course, is a thorough FactFind, with particular emphasis on explaining and establishing the client’s attitude to investment risk. This should then be followed with a pre-sale letter of recommendation, including an explanation of just how the product works, entry and exit terms, how the recommended funds match the client’s attitude to investment risk, plus of course coverage of the relevant tax considerations and risk warnings. Perhaps in respect of products from non-mainstream providers (a list of which from the FSA could be useful), the file would need to record due diligence as to the institution’s financial strength. Oh yes, possible alternative products/strategies should also be given some coverage, perhaps with sample costings..

    That about covers all the bases, doesn’t it? For the vast majority of product recommendations, does it really need to be any more complicated than that?

    With such a procedural template, not only would everyone know the rules of the game but breaches would be considerably easier to identify and less vulnerable to challenge or dispute. Both the regulated and the regulators would be able to do their jobs better, which would surely lead to the “better outcomes for consumers” (this year’s regulatory buzz phrase), about which the FSA is so fond of harping on.

    But then again, we’re saddled with a regulator which seems to be constitutionally incapable of navigating the most straightforward course towards just about anything. If we can find a way to complicate something, then by golly, let’s get on with it and justify those big salaries and bonuses.

    Once again, observance of the Statutory Code of Practice For Regulators could solve so many problems for everyone.

    The root of the problem, of course, is that the FSA just ignores the Code and no one holds it to account (but I’m working on it).

Leave a comment