Coincidentally, the FSA’s £60m fine imposed on Barclays Bank was announced as we received our annual bill from the regulator. From a total bill of £10,000, we pay £8,000 to the Financial Services Compensation Scheme.
I’ve often wondered what the FSA does with money from fines. Apparently it uses it to to reduce fees to regulated firms, but both fees and fines keep rising. The FSA’s fines for the first half of 2012 have reached £93 million.
Rumour has it that traders at Barclays’ and other banks have been manipulating LIBOR and EURIBOR rates for years. Why had the FSA not picked this up in its regular regulatory scrutiny?
There is a fundamental flaw with UK financial services regulation. The FSA is an all powerful, unaccountable judge, jury and executioner. It keeps growing. It now has an annual budget of half a billion pounds. It occupies expensive offices in Canary Wharf. More than 400 of its staff earn over £100,000 a year. The chief executive earns more than £800,000.
It increasingly demands that financial advisers get better qualified and charge fees. Ironically, virtually no FSA staff are professionally qualified to the new Level 4 required status for advisers.
Anecdotal evidence is that when the FSA visits it is clear they don’t know what they’re doing and lack adequate skills and knowledge. It’s little wonder regulation is failing.
The FSA continuously fails to spot regulatory failings, imposes fines after the event and has retrospectively changed regulations. It does not adhere to case law and legislation and can create its own rules.
The major problem is that it is in the FSA’s interests to promote a compensation culture. The more scandals the better. But this just undermines consumer confidence in financial services.
Still, what else do you expect of a Labour creation? It is a Government quango, self-serving and ineffective. It is disproportionately influenced by bancassurers and insurance companies. It is primarily run by bankers.
The last time I checked there was only one token IFA on its board of directors. You really couldn’t make it up, could you?
FSA fines should go directly into the FSCS – certainly not George Osborne’s Treasury. I can think of no other UK business that pays compensation to clients of other failed firms.
Tony Byrne is a chartered and certified financial planner and financial planning director, Wealth and Tax Management