Chancellor George Osborne has announced plans to set up a “powerful” new Consumer Protection and Markets Authority to oversee IFAs and regulate their conduct.
Speaking at Mansion House last night the Chancellor said the new body “will regulate the conduct of every authorised financial firm providing services to consumers. It will also be responsible for ensuring good conduct of business in the UK’s retail and wholesale financial services, in order to preserve our reputation for transparency and efficiency as well as our position as one of the world’s leading global financial centres.”
In addition to the Consumer Protection and Markets Authority an independent Financial Policy Committee at the Bank of England overseeing macro-prudential regulation will be set up. A single agency responsible for tackling economic crime will also be created.
The government has decided to abolish the existing tripartite regulatory system made up of the Treasury, the Bank, and the FSA in favour of handing regulatory power to the Bank.
As a result the FSA will cease to exist in its current form.
In response to the reforms chairman of the FSA Lord Turner says: “The FSA now has the clarity of direction and timescale as well as the leadership that we need to meet the challenges ahead.
“On retail customer protection, the FSA has recognised the need for a shift in our past approach, moving to the more interventionist approach which we set out in our recently published retail conduct strategy. The new Consumer Protection and Markets Authority will have a strong focus on this challenge, while also maintaining strong focus on conduct issues in wholesale products.”
Turner says aspects of regulation such enforcement activity are still to be resolved.
He adds: “But the overall future shape of financial regulation is now much clearer and we are in a strong position to create a future regulatory system which builds on the FSA’s achievements over the last few years of major change.”
Bank governor Mervyn King welcomed the central bank’s new powers last night.
King said: “The Bank of England cannot effectively perform its role as lender of last resort without first-hand knowledge of the health of the banks to which it might provide support. In peacetime, regulation can be conducted outside the central bank. But in a crisis, decisions must be made quickly and decisively and the central bank, working with government which is always responsible for any use of public money, needs to be in charge.
“We shall aim to avoid an overly legalistic culture with its associated compliance-driven style of regulation. That is an important reason for the separation of consumer protection and market conduct from prudential regulation.
“We must reverse the seemingly inexorable trend towards more regulation and more regulators. That did not work in the past and is not the right response now.”