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Turner: CPMA must balance choice with customer protection

Lord-Turner.jpg

FSA chairman Lord Turner has stressed that regulation of financial services should not stifle customers’ freedom to choose products and services.

In his annual Mansion House speech in London last night, Turner (pictured) warned that the new Consumer Protection and Markets Authority must be mindful of consumer ignorance but at the same time must not operate in a “technocratic bubble”.

He said: “We cannot leave retail financial markets entirely to themselves and continue to accept the waves of mis-selling which have been such a feature of UK financial services for the last 20 years… in many retail financial markets, the imbalances of knowledge and power between consumers and providers are so profound, and the potential for perverse incentives so great, that even highly competitive markets and extensive information disclosure are insufficient to protect consumer interests.

“But nor should we swing to the other extreme and attempt to ensure that nobody ever exercises free choice to make decisions they subsequently regret.”

Turner said the RDR and the Mortgage Market Review was attempting to balance these “alternative desirable objectives” between choice and consumer protection.

He said: “We need to strike a balance, recognising that any regulation which protects some customers from taking on mortgages they cannot afford will inevitably affect others seeking to make sensible, affordable choices.”

Turner hinted at the possibility of restricting mortgage lending during rising markets in an attempt to stop any future credit or housing bubbles.

Turner also admitted that he thought the capital adequacy requirements imposed on European banks as part of Basel III did not do enough in an ideal world, but do enough to control the banking sector and protect European economies in this environment.

He said: “If we were philosopher kings designing a banking system entirely anew for a greenfield economy, should we have set still higher capital ratios than in the Basel III regime? Yes I believe we should. But starting from where we actually are, the Basel III reforms will significantly improve the resilience of our banking systems without harming economic recovery.”

In last year’s Mansion House speech, Lord Turner was heckled by MEP for Yorkshire and North Lincolnshire and IFA advocate Godfrey Bloom, something he commented on in this year’s speech.

He said: “We can build a more stable financial system better able to serve the needs of the real economy and of consumers, but it requires choices more complex than those which last year’s heckler was capable of grasping.”

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Comments

There are 10 comments at the moment, we would love to hear your opinion too.

  1. It says a lot about the man that, all other things aside, he feels the need to insult somebody who heckled him 12 months ago when he is not there to defend himself.

    It is surely taking “L’esprit de l’escalier” to the extreme?

  2. Ergo, anyone who disagrees with the fsa is incapable of grasping the complexities of the financial system.

  3. Laughable (again) ... !! 22nd September 2010 at 9:33 am

    {… the new Consumer Protection and Markets Authority (CPMA) must be mindful of consumer ignorance but at the same time must not operate in a “technocratic bubble”}

    Sorry, isn’t that precisely how the FSA have been acting?? I would probably add the word ‘dictatorial’ …

    Furthermore,

    {“We cannot leave retail financial markets entirely to themselves and continue to accept the waves of mis-selling which have been such a feature of UK financial services for the last 20 years…” }

    Pretty much preciptated by the Banks in whose pockets the FSA happily sit … ‘allegedly’?? Yet, s*d all has been done to eradicate their sales practices, has it??

    Prat.

    Interesting that LT is trying to warn Europe away from over-regulating UK Fin Services …

  4. ” the new Consumer Protection and Markets Authority must be mindful of consumer ignorance”
    “But nor should we swing to the other extreme and attempt to ensure that nobody ever exercises free choice to make decisions they subsequently regret.”

    is this not exactly what RDR will impose – a lack of choice for those not already fortunate enough and willing to pay fees

  5. The wave of mis-selling has largely (and remains largely) the result of greedy banks with bad sales practices and poor value-for-money products.

    The banks will now have all the necessary compliance in place with multi-page documents spewed our by computer with every risk warning that has ever been created by the FSA. But all the box ticking won’t stop the banks from selling crap for the maximum possible commission. The sad thing is that many people simply don’t know enough to realise that the ‘advice’ they receive from banks is usually designed to extract as much money from their pockets as possible without regard to the quality or relevance of the product.

    What is the FSAs response – do everything it can to get rid of the independent advice sector and anyone who might prove troublesome (in competitive terms) to the banks and let them continue with the mis-selling. After all, when the banks are fined for mis-selling, the money is effectively paid by all of us and helps keep the FSA (and all the other quangocrats) in highly paid non-jobs.

  6. Eloquent but vacuous hogwash. And to think we have to pay for such tosh.

  7. LORD TURNIP!

  8. A man completely out of his depth.

    Why can’t he go home and herd some sheep? Or did he just buy it for the tax advantages?

  9. His regulation of financial services will not only stifle customers’ freedom to choose products and services,it will kill it off for all except the wealthy people,just like him.
    p.s. Well done Godfrey Bloom.keep up the good work

  10. Dear Lord Turner.

    What will be ‘new’ about this CPMA?

    Same people, same culture, same misguided political influence.

    Some of us may not be wealthy, have no peerage, have no futures, but we do have common sense unlike those of you who look down their noses at the rest of society which is having to deal with the mess your ‘bad policy’ created.

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