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FSA set to relax rules for new bank entrants

Martin Wheatley BBA Conference 2012 480

The FSA is set to relax rules for new banking entrants to make it easier for them to gain authorisation.

Speaking to the Parliamentary Commission on Banking Standards today, FSA managing director and Financial Conduct Authority chief executive designate Martin Wheatley said the FSA began work on a report six months ago with the aim of “bringing down the cost and complexity” of authorisation.

Wheatley said the regulator will relax capital requirements and system readiness for new entrants to help them get started.

He said: “To require a new entrant to have the amount of capital for where it expects its business to be in three to five years is unreasonable to impose on day zero. There may be a level of capital we can expect them to be build up over time rather than up front.”

Wheatley says the same standards of practice apply to all banks, but for new entrants the FSA is willing to relax systems controls.

He said: “New banks tell us that in order to set up they need capital to employ the right people and systems, but they face a catch 22 situation where until they are authorised they cannot get the capital or the people or systems.

“But cannot authorise them until that is in place. We are looking at a staged process where we can give new entrants enough certainty to recruit a chief executive and get capital but still reserve our position that they cannot be fully operational until the right things are in place.”

Wheatley also said he favours transparency of charges instead of regulatory intervention to end free banking because it would not end the problem of some customers paying for the services of others.

He also outlined his approach to product intervention, saying the FSA would restrict access to certain products it felt could cause consumer detriment.

He said: “There are lots of products in the market and some are very complex, difficult to understand and with lots of moving parts, but for the right audience they may be appropriate. We would not want to step in and say you should not sell that product, but for some people it would be inappropriate.”

Wheatley highlights Ucis as an example of a product that is not suitable for private clients but may be suitable for professional investors because of their complexity.


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There are 11 comments at the moment, we would love to hear your opinion too.

  1. What bias. Zero tolerance for IFAs regarding authoristion but a relaxation of the qualifying conditions for boy bankers.

    The trip from Canary Wharf to Threadneedle Street being made easier ?

  2. This is “retail cleansing” they are trying to clear away advice for the less well off to enable the banks to clean up. What a shower!

  3. After the great success of the MAS, it would appear that our FSA fees could shortly be providing student loans…..

    Great idea to relax the rule for the sector with most complaints.

    Has Hector crept back in for the afternoon?

  4. You couldn’t make it up…..but FSA has!

  5. Typical! favours for the Banking Boys again who are responsible for all the poor advice over the past two decades. No respect for the IFA sector who offer a valuable respectable service who have nothing more than the interests of the client at heart. When is somebody going to put a stop to this debacle called RDR ?

  6. Roman Duzinkewycz 25th October 2012 at 4:55 pm

    I honestly can’t believe what I’m reading here – I can’t work if I don’t attain a certain level (I trust you understand the implications of that statement) so I am now expecting these idiots (and that is being polite but fair) to pay my salary until I do – where do I send my monthly invoices to?
    Does anyone now think they are a necessity to oversee IFA’s and their conduct?
    Words fail me completely. Disgusting but predictable approach.

  7. They will relax the rules for new bank enterants, but not for IFA’s. It was the banks that got us into this mess in the first place.

    Then again all those at the FSA are from the banking industry.

    Big it up FSA and clean your own house first.

  8. Hey Buddy, wanna start a bank, no problem. Not enough capital, no problem we’ll help you get started by relaxing the rules all the others have to abide by and then we will have another bank to supervise which can get rid of more IFAs, because (in a whisper) we’ve tried our best over the years, but the pesky little critters keep surviving.

    Why is no one surprised at this ?

  9. So, is this all because of the ‘Bank of Dave’?

  10. Pass up and brewery comes to mind

  11. @Ronund Tabler

    If this is being done to make it easier to set up genuine Credit Unions & Bank of Daves – then I wouldn’t complain.

    Unfortunately we’re ALL cynical over the real motives behind these edicts whice comes from watching what’s been happening with the financial sector over the past few years.

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