Last week, the FSA looked to answer this question with a consultation paper, which amongst other things proposed a more level playing field between the regulation of investment and bank deposit structured products.
Currently, banks are regulated through the Banking Code Standards Board but from next year the FSA plans to oversee the regulation of banks and building societies payment transactions under the European Payment Services Directive.
The regulator is currently reviewing whether to extend its grip to oversee regulation of all aspects of banks’ relationships with their retail customers.
FSA managing director of retail markets Jon Pain says: “Retail banking is going through a period of rapid change and regulation needs to keep pace with this change. We believe that in order to ensure that the regulatory model is fit to meet these challenges, now and in the future, the FSA should regulate the wider aspects of everyday banking for all consumers.”
One major issue highlighted by the FSA is the regulation of certain structured products provided by banks. The FSA argues that there is little difference between a structured investment product and a structured bank deposit, both of which may be linked to stock exchange indices but are subject to different regulatory rules.
The Investment Management Association has welcomed the move to put the disclosure of structured deposits on a par with funds.
IMA chief executive Richard Saunders says: “This is a welcome first step in levelling the playing field between structured deposits and investment funds. It will, however, be important that when bringing deposits within the scope of the FSA’s conduct of business rules, the opportunity will be taken to ensure that consumers benefit from comparable disclosure about product features, costs and risks that investors in funds receive. This is particularly important where products such as structured deposits compete directly with funds.”
Meanwhile, home, or property at least, is still where IMA’s heart is as it announces the creation of a new property sector. The sector which launches on January 1 next year will encompass all types of UK authorised funds investing in property, including direct property funds and property securities funds.