Financial Conduct Authority chief executive Martin Wheatley has told the industry it should not be under any illusion that the FCA will stray from its judgement-based approach to regulation.
Speaking at the Association of British Insurers’ biennial conference in London today, Wheatley noted the expectation among the industry that the move away from principles-based “tick-box” regulation would be short-lived.
But he said the FCA represents a new era in financial regulation and that features such as thematic reviews and increased use of the regulator’s judgement are “here to stay”.
Wheatley said: “I know some people think this focus on business ethics is a regulatory ‘phase’. I have heard it described as a ‘cold breeze’ that will pass through. But I want to make it clear the first 100 days of the FCA are a bellwether of things to come. It is lasting change, as opposed to the firework that peters out and falls to earth. The financial sector needs to believe this change is permanent and prepare themselves now for the new regulatory world.”
He admitted the FSA needed “robust reform”, and he understands the industry scepticism over how much had actually changed.
Wheatley said looking back the previous approach to regulation, which assumed that consumers are rational and do not choose one adviser over another “because they are wearing a smarter tie”, was flawed.
He gave the example of the FCA’s review into interest-only mortgages as the type of preventative measures the regulator will take in future, saying its review was “a wake-up call for 600,000 borrowers who could have been sleepwalking into a problem”.