One of Apfa’s concerns at the moment relates to the FSA’s consultation: Journey to the FCA.
The document sets out the FSA’s initial thinking as to how it will act when it splits into the Prudential Regulation Authority and Financial Conduct Authority. As you might expect, there is a chapter dedicated to how to measure success. It sets out suggestions for what might be an appropriate framework and indicates where more work is needed on defining specific measures.
All well and good, except that the odd thing about this is that it is the FCA (or FSA as “FCA to be”) that will decide all this.
In terms of governance and accountability, it is normal for an individual or organisation to have its goals and success indicators set by who they are accountable to. It is not normal for those striving to meet objectives to set the method of measuring whether those objectives have been met, for the obvious reason that they might be tempted to choose convenient or easy to hit targets.
Which brings me to our second major concern. It goes without saying that the performance indicators should be objective and measurable, so it is clear what progress has been made. I would emphasise that it should be a range of indicators.
I have heard it argued that macroeconomic and financial statistics cannot provide a measure of a regulator’s performance because so many other factors are at play. And I would agree that the success of an organisation with responsibilities and objectives as complex as the FCA cannot be measured by this or that number. But as an organisation with as much impact as the national regulator for the financial services sector, its actions are not immaterial to how a significant sector of the economy works.
A broad range of economic data and financial measures will paint a better picture of its performance than woolly customer satisfaction surveys.
Apfa will of course be responding to the FSA’s document and making our case. However, we are not prepared to let the matter rest at the FSA’s discretion.
If the FSA’s conclusion is for a rather vague set of subjective measures, we will develop our own scorecard composed of the indicators that we think will properly measure the performance of the regulator from an adviser perspective.
We will collate the data and publish it when the FCA starts its work in April 2013 to provide a starting benchmark. And we will revisit on an annual basis to measure progress.
The scorecard will be composed of concrete measures (such as the level of savings, the cost of regulation) that correspond to the “8 key success measures” that cover the areas the FCA hopes to achieve in its early years.
If the FSA isn’t willing to provide a clear cut method for measuring its success, Apfa will.
Chris Hannant is policy director at APFA