FCA chief executive Martin Wheatley says the success of the regulator will depend on protecting consumers amidst the scale of change in the financial services industry which could be as revolutionary as the Big Bang.
In a speech at Mansion House last night, Wheatley said competition has to be brought into “every decision, in every rule, in every action we take.”
Wheatley said to do that successfully, the regulator is supporting innovation and giving the market greater clarity on its expectations, citing its guidance on non-advised and simplified advice services as a recent example.
He said the current pace of technological change “can be daunting, particularly for regulators”.
Wheatley said: “Many will rightly ask, therefore, whether we would accept change, certainly at the speed and scale we have seen elsewhere.
“The answer is yes, if it can be properly managed and consumers still benefit from appropriate protection. This is the moment on which our success will turn.”
He said the choices currently faced by the FCA are similar to those faced by the Office of Fair Trading which sought to liberalise the pharmacy market in the early 2000s.
He said: “On the one hand, there was the need for strong consumer protection. After all, consumers are generally no more versed in the finer points of pharmacology than they are on the intricacies of finance.
“But the OFT decided to reduce barriers to entry for community pharmacies, allowing any business with appropriately qualified staff to dispense prescriptions.
“Seven years after the reforms, it was estimated that the consumers were saving as much as £68m a year. More importantly, consumer protection was not lessened.
“This is the balance that we should be aiming for – change, some disruption, new models of distribution but all of it with the interests of the consumer at its heart.”
Wheatley added the FCA’s role is to ensure the right incentives are in place for both the regulator and regulated firms, meaning “the rules of the game are such that firms can thrive in the public interest”.
He said: “To better set these rules we have created, in conjunction with Henley Business School, a master’s degree in financial regulation. This will set a global standard and be open to all, including those we oversee.
“It is a fresh approach that tries to move away from the game of hide and seek – instead it will help provide certainty in a period of change and the tools so that both sides can see how financial services, even in imperfect markets, can deliver what consumers need.
“In short, it will help us prepare for the rapid change that could be as revolutionary for the financial services as the Big Bang before it. Unlike the liberalisation of the 80s, and all the cynicism that went hand-in-hand with it, we want to ensure that a competitive financial services market works for the interests of consumers, with adequate protections in place.”