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Think-tank mocks FCA for trying to create ‘perfect’ market

The Institute for Economic Affairs has mocked the way the FCA designs policy, accusing it of using an “A-Level economics textbook” in an effort to create a “perfect market”.

Giving evidence to the Treasury select committee yesterday, IEA editorial and programme director Philip Booth said the regulator has bombarded the market with information which has hindered effective competition.

He said: “The danger is you look at a market – and this is the way I think the FCA and politicians behave – you compare it with your first year A-level economics textbook and see these market failures that can somehow be eliminated by regulation or promotion of information provision. But you end up swamping the market with information and detailed regulation, and so prevent the dynamic process of competition.

“Continual regulation over the last 30 years has been designed to create the perfect market. I think that is what regulators are trying to create with perfect information in front of consumers, but I don’t think that has made things materially better.”

Booth claimed the complexity of regulation creates barriers to entry, including in the advice market.

Financial Services Consumer Panel chair Sue Lewis said banks are to blame for the level of detailed financial services regulation in the UK

She said: “If banks behaved just a little bit better there would be less need for regulation but they don’t. You see long lists of fines for misselling and poor advice.”


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There are 6 comments at the moment, we would love to hear your opinion too.

  1. Absolutely spot on. However I cannot see the regulator taking any notice.

  2. Or banks.
    Since it is becoming an accepted fact that Banks are a “Rogue Elephant” that materials distorts the market, and are ultimately uncontrollable, would it not be a lot simpler to exclude them totally from the retail finance market – other than providing banks accounts and other pure cash products.

  3. I agree that there is no such thing as perfect market and I am sure the FCA or any other regulatory body are well aware. The heavy hand in regulations has been necessary to ensure that the retail market is not taken for a ride. The pricing model that creates a level playing field, consistency and competency of advisers and Investment Managers provides confidence that the market desires.

  4. I don’t often agree with “think tanks” but here there seems to be one with a brain !!

    Well said !!

  5. ‘You will never understand bureaucracies until you understand that for bureaucrats, procedure is everything and outcomes are nothing.’ Thomas Sowell.

  6. I can just see the next evidence gathering meeting between the TSC and M Wheatley.
    TSC member
    “So Mr Wheatley what do you think of the findings of the IEA in that you make life to complicated and trying to make a perfect market when it cannot be done. In short the FCA is not fit for purpose.”
    Mr Wheatley
    “We think they are entirely wrong and that we do a lot pot pieces of important work. Next question please?”

    The long and short of it is that the FCA could not care less. There are a bureaucracy gone mad but like all of these people they are so concerned about means and totally oblivious to ends. This unfortunately will make no difference to those in charge of the FCA at all.

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