So the FSA says it was overburdened. Yep, perhaps they were too busy keeping the garden tidy while the house burned down.
Lord Adair Turner has said one of the major flaws in the regulatory structure which failed to avert the financial crisis in the UK was the FSA was “asked to do too much”.
“A lot of apparently very clever people got it very wrong, and the ordinary citizen suffered. We have to do better in future,” he added.
This got me thinking. According to reports setting up the new regulatory authorities could cost up to £150m.
So, where might one start?
1. One of the first tasks could be to set up a department to monitor, fully understand and report back on what is being written about in the personal finance and business press. A team of ex-editors and journalists, quite possibly an ex-IFA or two, and maybe even a few experienced and consumer minded PR people would make an excellent team. After all, many of the scandals of the last twenty years were written about many years, if not decades before they really began to hurt people.
What do journalists know? Well, as with all walks of life it depends which ones you ask. But generally speaking they can spot a rip-off from a country mile away.
2. Secondly, we could build a similar team to focus on consumer groups. A department to work alongside and understand the ever changing concerns held by FOS, Which?, Citizens Advice and so on.
Both departments would provide early warnings about potential issues and how to resolve them before they become too big. Perhaps, then, we might be able to prevent the next mis-selling scandal rather than quietly letting it happen before championing the compensation culture after the event.
3. For step three we might develop a policy that sees people who understand a market continue to work on that market, not leave or switch around.
It strikes many people that a key problem with financial services regulation over the years is that people keep moving around. Once they begin to understand a market they tend to move on and someone else takes over. Do we need a strategy where the people making the rules stay in the same department and see it through?
What we might not want are people who join the FSA primarily to get ‘FSA’ on their CV with a view to departing a few years later. I’m told that’s exactly why many people have joined over the years.
Kevin Carr is founder of Kevin Carr Consulting