The Conservative manifesto confirms that it will dismantle the infamous tripartite system made up of the Treasury, the FSA and the Bank of England.
But while Shadow Chancellor George Osborne talks of “a powerful new regulator” and “a powerful new consumer protector”, I doubt the upheaval will be worth it.
Many of the employees who work at the FSA previously worked for the Bank of England. One can only assume that many will return to Threadneedle Street if the Bank of England is charged with regulating the banks.
The FSA chairman Lord Adair Turner has distanced himself from the regulator’s blemished track record and has made several noises about a radical overhaul and the need for a more heavy-handed approach to regulation.
We can already take some comfort that the FSA has hauled several firms over the coals and that it is being more proactive, but this is still not enough and questions remain over whether it can police the industry effectively. However, such questions would still remain with a new “powerful” Consumer Protection Agency.
Many of the Tory proposals for the new CPA are in force already, in some shape or form.
They talk about summary boxes for credit card statements, yet they have been requisite since 2006. It talks about the need for bank charges to be more transparent, but after a long battle with the OFT the banks have started to mend their ways.
The paper talks about opening up competition in the banking marketplace, but new entrants (Tesco, Virgin and Metro Bank) are already emerging.
The Tories have raised concerns that the FSA does not, unlike the Advertising Standards Authority, publicly chastise companies that have broken the rules. They worry that consumers’ interests may not be protected as a result.
The new CPA may name and shame, but this will not give the consumer greater protection. Most complaints to the ASA are often nothing more than semantics because they come mostly from snitching rivals, and the horse has often bolted by the time a provider is reined in.
Few would disagree that the tripartite system is flawed and that its failings need to be addressed. So why not give the FSA solitary power and the responsibility to tighten banking regulations? Let the Bank of England channel its energies on inflation and interest rates. The Government should get on with the business of running the country rather than meddling in financial services regulation.
Do not transfer the regulation of consumer credit from the Office of Fair Trading to the new CPA. Transfer it to the FSA instead, thereby creating a unified regulatory regime for financial services firms and consumers.
Overhauling the regulatory system the Conservative way would cost billions. It could take years to create administrative systems and it could put the mockers on work in progress – the retail distribution review could be in jeopardy.
But most importantly, the Tory vision will not guarantee a better regulatory system or improved consumer protection. We should work with and develop what we have in place to safeguard the interests of the consumer.
Folklore has it that when former England football boss Graham Taylor was manager of Aston Villa, he once stormed into the dressing room with his side losing 2-0 and shouted to his players: “You have got yourselves into this mess, so you can get yourself out.
“It is a strategy that Osborne should adopt with the FSA should he move into number 11 Downing Street.
Paul Farrow is personal finance editor at the Telegraph Media Group