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Problems loom for tripartite committee’s risk role

Regulation expert Richard Hobbs has doubts over whether a new tripartite consumer protection committee proposed by the FSA, would be effective in its main aim of identifying emerging risks.

Last week the FSA, the Office of Fair Trading and the Financial Ombudsman Service proposed the committee to take on identifying risks that could become widespread as well as ways of dealing with them. The regulator says specialists from the three bodies would aim to deal with threats quickly, adding that this complements the FSA’s existing supervision regime.

Lansons director of regulatory consulting Richard Hobbs says: “It is hard to see how a joint committee that meets twice a year, even with more extensive working arrangements behind the scenes, could achieve anything beyond the work that is already carried out within the respective bodies. All the tripartite committee will be able to do is receive information from elsewhere that identifies risk, confirm the existence of that risk and decide what to do about it.

“This new body is not about risk identification, it is about enhanced coordination.”

TLT head of financial services regulation Suzanne MacDonald says: “On the face it, the new consumer protection committee sounds like a good idea but I have concerns about how this will work in practice.

“I suspect it has been established partly in response to criticism levied at the FSA that it has not been proactive and has not taken action when it needed to.”

She asks if this is “purely a political move by the FSA”.

Evolve Financial Planning director Jason Witcombe says: “Acting proactively rather than reactively is good for everyone. We need joined-up thinking between these bodies and it seems like a pretty logical step.”

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Comments

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  1. Looming? The horse is already long gone.

    As for identifying emerging risks, their track record is unacceptably bad. And I’ve yet to find a leopard changing it’s spots.

    The FSA and its predecessors didn’t see coming:

    1 mortgage/annuities (home income plans)
    2 late 1980s housing crash
    3 effective regulation of lifetime mortgages
    4 splits
    5 effective (or any) regulation of bank lending and risk taking
    6 endowment mortgages
    7 PPI (an OBVIOUS accident waiting to happen)

    All of which this little IFA saw coming and didn’t get involved in them, except endowment mortgages. With those what I did not and could not have foreseen was the FSA’s poor understanding of mutuals and what demutualisation did to policy returns. (Our sales procedures stood up to examination and no claims against us to date, touch wood.)

    If this small IFA could see it, how come the regulator (for want of a better word) couldn’t? And what confidence can we have that this long established pattern will change?

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