View more on these topics

Keep power in reserve for a crisis

The Government is being urged to have a reserve power it can use to intervene if it thinks regulators are failing to act in the face of a crisis.

The Treasury’s consultation paper on the regulatory changes, published in July, says when emerging risks become a crisis the Government would have overall responsibility for decisions affecting public funds and international obligations.

But the Treasury select committee report on the proposals says the boundary between emerging risks and crisis mode is often unclear, citing the speed at which Royal Bank of Scotland and HBOS had to be rescued.

It says: “There has to be some mechanism that will allow the Government to intervene if, in its view, a crisis is developing and other authorities are unwilling to act. It will bear the responsibility for any errors, it must have the information and the freedom in needs to choose its position.”

The reserve power would be similar to one currently held by the Treasury over the monetary policy committee which allows it to set monetary policy in extreme circumstances.

Under the Treasury’s prop- osals to deal with failed institutions, the Bank of England will design and execute the special resolution regime which will resolve failed institutions, the Prudential Regulation Authority will decide whether to put an institution into resolution and the Government will decide if and when to spend public money.

The select committee report says: “We have some doubts about that system.”MPs have called on the Government to scrap plans to promote the new Consumer Protection and Markets Authority as a consumer champion.

In its report on regulatory changes, published last week, the Treasury select committee says using the phrase could mislead consumers.

It says: “We strongly urge the Government to drop the title of consumer champion from the CPMA.

“If a regulator is promoted as a consumer champion, consumers may falsely believe all financial products are risk free, creating moral hazard. It is simply not possible to protect every interest at all times.”

But Financial Services Consumer Panel chairman Adam Phillips does not think the title should be dropped.

He says: “The panel is concerned that memories are already fading of the major misselling scandals, when too little was done too late to stop the sale of harmful products.”

Annuity Direct chief executive Bob Bullivant says: “Consumer champion suggests a bias and implies that consumers do not need to worry about their financial decisions. The question here is to what extent should the regulator try to save the consumer from themselves.”

The select committee report says effective regulation should be in consumers’ best inter- ests and regulators should ensure regulation is effective and proportionate.

It adds the CPMA should have competition as a primary objective as it is an effective way of protecting consumers.

Derbyshire Booth Financial Management managing dir- ector Greg Heath says competition will provide better outcomes if companies causing problems face stiffer regu- lation and higher fees.

He says: “At the moment, the regulator is treating everybody the same but it should take a more hands-on approach with firms that cause problems, for example, by looking at where the complaints to the Financial Ombudsman Service come from. It is a carrot and stick approach and right now they seem to be using just a stick.”

Recommended

Guernsey sets up Qrops code

Guernsey Association of Pension Providers has launched a draft code of practice on qualified regis- tered overseas pension schemes. GAPP code of practice group chairman Roger Berry says the code will ensure that people using Qrops schemes from Guernsey know what is permissible under HMRC regulations. The code tells advisers about the service and standard […]

1

Audit tools help advisers gauge RDR compliance

Consultancy firm Engage Partnership is offering a suite of audit tools for advisers to measure how RDR-compliant their businesses are. The engage transparency index modelling tool benchmarks firms against best practice processes. It measures a firm’s transparency on aspects such as charges, customer service and product suitability. The audit process also looks at how client […]

Qrops firms snub claims that annuity rules will hit demand

Qrops providers have hit back at suggestions that annuitisation reforms will dramatically reduce demand for overseas pension schemes. Last December, Standard Life head of pensions policy John Lawson said the new flexible drawdown regime, which will come into force in April, will be a “game changer” for Qrops. Under the new rules, people will be […]

1

Obama moves to abolish Freddie Mac and Fannie Mae

The administration of American president Barack Obama today moved to abolish Freddie Mac and Fannie Mae, the gigantic state enterprises that helped channel unsustainable sums of money into housing before the credit crunch. The Obama administration outlined proposals in a white paper released today that aims to reform America’s housing finance market. These include the […]

Jelf flexible benefits

In Focus: How to choose a flexible benefits provider — seven top tips

Jelf Employee Benefits looks at some of the key considerations employers should think about when reviewing and choosing a flexible benefits provider. Choosing the right benefits for your employees is one thing but delivering a successful employee benefits strategy is about understanding the complete picture and delivering it in a personalised way so that it resonates with each and every individual in your business. 

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment