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‘Where’s the cost-benefit analysis on axing FSA?’

The Government has failed to provide a cost-benefit analysis that justifies its plan to scrap the FSA in favour of a twin peaks regulatory system, according to the Small Business Practitioner Panel.

Giving evidence to the Treasury select committee, panel chairman Guy Matthews said systemic risk could have been dealt with under an augmented FSA.

He said: “The constant burden of regulation is probably disproportionate and we want proportionality. We have not seen any evidence of a cost-benefit analysis suggesting this could not have been achieved within the exiting structure.”

The Treasury’s consultation document estimates the cost of the changes to be £50m over three years.

Matthews said dual regulation could take up “significant management time” for small firms. He said: “Some smaller entities do not separate prudential and conduct sides and have to provide separate data.”

Financial Services Consumer Panel chairman Adam Phillips said efforts to keep regulatory costs from rising could lead to less supervision.

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  1. Firstly, the FSA isn’t really being scrapped. Rather, it’s being partitioned, though quite how the cost of so doing is going to run to £50m is both mystifying and appalling, not least because this cost, like everything else, will be dumped on the industry. What’s involved, for heaven’s sake, that’s going to engulf £50m?

    Secondly, I agree that a better and vastly less costly way of achieving what the industry desperately needs from its regulator would be root and branch reform of the structure already in place, not least by forcing the FSA to observe the provisions of the Statutory Code of Practice For Regulators. The FSA was created by Statute, yet bizarrely appears to be able to get away with ignoring completely the Statutory Code by which it’s supposed to operate.

    Why am I the only person ever to mention the Code and why is AIFA apparently doing nothing to hold the FSA to account on this issue?

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