The FCA’s elusive quest for a purpose

Natalie Holt, journalist with Money Marketing Photo by Michael Walter/Troika

What is the FCA for? Advisers probably find themselves asking this question when the latest round of regulatory bills come in, but it turns out they are not the only ones who want to know. The FCA too is searching for answers.

With a relatively new chief executive in post, one could argue now is an ideal opportunity to review the shape of regulation and how it could be made better for consumers and the firms the FCA regulates.

In the mission consultation document, FCA boss Andrew Bailey argues in the last 10 years we have suffered not one but two financial crises: the one we all know about, which challenged the stability of the global financial system; and a second crisis related to bad behaviour on an epic scale, what with payment protection insurance, Libor, interest rate swaps and money laundering.

Bailey says: “This is a very sorry history, and the future needs to be radically different from the past. We owe this to the public who are the consumers of financial services.” This appears to be a tacit acknowledgement that the previous way of regulating did not work.

The consultation raises interesting points about where personal responsibility starts and stops, and questions whether vulnerable customers should be given greater priority. The paper also talks about reviewing the behind-closed-doors policy of private warnings.

“This is a very sorry history, and the future needs to be radically different from the past.”

But I for one am sceptical about what all this is meant to achieve. We had one regulatory restructure a little over three years ago. Shouldn’t overarching questions about the FCA’s priorities be settled by now?

Bailey says: “The mission is not a long document. We could have written much more, but we have tried to keep it short and focused on the important questions we see. It is striking to me at least that financial conduct regulation is not supported by a particularly large body of academic and other thinking.” Why? What would more academic papers achieve beyond putting philosophy before actual policy?

The mission, setting aside the fact it brings to mind images of a cult-like organisation which the regulator wants to convert us to, is 50 pages long and involves a three-month industry consultation. But with the FCA’s objectives set by Parliament, it is unclear how much scope there is for the regulator to take on board the feedback it gets. It all strikes me as navel-gazing in the extreme.

Natalie Holt is editor of Money Marketing