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FSA warns bank risk could be pushed on public

MPs were told by FSA chief executive Hector Sants there is a danger of risk being pushed out of the banking system and on to consumers.

Sants outlined possible consequences of the current regulatory focus on driving down risk in the banking sector. He said: “One of the consequences could well be to push risk out of that aspect of the system, not just into the shadow system but out of the system altogether, so you can then push risk effectively on to the consumer.

“I do not think it is happening to a significant degree at the moment but logically that is a potential area of future risk we need to be very careful about.”

Sants used the example of exchange traded funds potentially moving leverage from “managers of risk” in institutions to the consumer. He said: “The risk is the leverage moves out of the visibility of the regulator from the point of view of regulating the manufacturers of product into the consumers of product.”

He said if the CPMA inherits the FSA’s toolkit, it will not have the tools to deal with the risk.

He said: “If you want a genuinely interventionist CPMA which is seen as powerful, then it needs the power to make executively-driven, direct interventions to ban products.”

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. Scott Taylor-Barr 24th November 2010 at 9:58 am

    Reading this it sounds more like Mr Sants pitching for more power, rather than any real customer benefit issue.

    He is right in that the fear of risk is now the driving force behind most decisions being made by financial institutions; which is moving risk to the consumer – i.e. they are being given choices to make that are too complex for the vast majority of consumers.

    But one has to ask how the ability to ban products meets this issue?

  2. “One of the consequences could well be to push risk out of that aspect of the system, not just into the shadow system but out of the system altogether, so you can then push risk effectively on to the consumer.

    What planet is this guy on? “Shadow System”? Don’t tell me – those nasty guys in the banks (who we now blame absolutely everything on) have developed a shadow system in which they hide things away from the regulator. Sounds like looking for imaginary Weapons of Mass Destrruction to me. Let’s go to war with the sector and spend hours chasing these “shadows” and then we’ll think the regulators are the good guys..

  3. Consumers are already paying the price by Gordon Brown’s tactic of bailing out the Banks with what amounts to ‘Taxpayers Credits’ hence placing the country deeper in debt.

    Why should we the ‘Taxpayers’ fund alleged failing Businesses, if you can’t run your business you should go down and be assist stripped?

    The whole concept of ‘Joe Public’ funding failing business is shear outright Robbery instigated by the biggest robber of all time Gordon Brown who legitimately robbed the pension funds. Now his co-partners in this crime of the century the Government act as a bunch of ‘Legitimized Mafia’ co-coordinating this crime via the EU another Legitimized Mafia’

    The near end of this saga will be when the state starts to take over every piece of high value land, as Brown has already licks his lips whilst in power and publicly expressed his concerns over the sheer value of privately owned property in the UK; yes that’s right your homes your savings that’s what they are after.

    Signed Carl Barron Chairman of agpcuk

  4. Mr Sants please give us a break, are you playing both ends against the centre. The whole objective of Financial Services Regulation has been to protect the Banks at any cost

    Infact apart from hot air, no effective action has been taken to protect the public from bank abuse.

    A large nujmber of regulatory executives were from the banking sector and see their future employment (with a clean COPYBOOK) back in the comfort of old friends.

    In reality the objective of the FSA has been empire building and the distruction of the independant market. The fact that the process has produced high cost and low return to the public appears accepted.

  5. “a danger of risk being pushed out of the banking system and on to consumers.” I’d thought that to be the situation already.

    The Treasury tells the FSA to lay off the banks and just let them get on with it.

    Despite proclaiming complete independence from government, the FSA does what it’s told and tries to make itself look busy and forward thinking with stuff like TCF and the RDR.

    Several banks get into trouble and have to be bailed out by the government with tax payers’ (i.e. consumers’) money.

    I don’t understand what he’s saying.

  6. Mortgage Market Review Commentator 24th November 2010 at 2:35 pm

    The consumer has to have an element of risk just as the provider does.
    Clearly, anything which is a risk to the provider has to be costed and so the consumer always pays for it in the cost of the product or at the back end if it all goes pear shaped.
    The issue the FSA needs to urgently address is allowing the customer to take risks – you can’t have a nanny state stopping people from making their own decisions even if they do not match the low risk/no risk profile that FSA think they should have.
    If you followed their process to its logical conclusion half the businesses in this country would not exist as the borrower risks his home to make it happen in the full knowledge it could all go horribly wrong and sometimes does.

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