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.”