Having been involved with financial services regulation since the passing of the Financial Services Act in 1986, whilst not an expert, I consider that I hold a decent grasp of not just the details but also the underlying principles and philosophy. Not in all that time have I struggled with the direction of travel quite as much as I do today.
The activities of the Prudential Regulatory Authority seem logical, consistent and whilst possibly too zealously applied, serve to protect firms and their customers from management excess. However the Financial Conduct Authority appears to be in the middle of totally reinventing their role without any proper discussion or authority. Since arriving in trade body land, I have always said that the FSA was a great regulator with solid well consulted rules. It was however at best a mediocre supervisor.
Our friends in the European Union have now taken most responsibility for making the rules, so the FCA is left with re-drafting and adding the agreed regulation to their rule book. It remains a mediocre supervisor. However the cost of operating what should be a simpler model continues to escalate. Disappointingly in recent discussions where AMI has asked for support on the phasing in of consumer credit regulation, the impact of MCD on adviser firms, on the under-lying trends from the MMR thematic review and on specific consumer issues arising from remortgaging we are told that these cannot be resourced or were not a high enough priority. Indeed it has taken almost twelve months to find a resource to undertake the mortgage examination syllabus review which all in the industry are agreed is long overdue. However this resource is external. One has to wonder what the £30m the industry is chucking in each year is being spent on.
The current focus is on an Advice Market Review and a Competition study. We should not blame the people doing this work, but those who conceived and approved these exercises need challenging. For the mortgage market the timing is poor and with little evidence of any advice gap and a highly competitive market still going through serious regulatory change. The industry deserves greater clarity and focus on the real issues facing consumers today.
When Parliament gave the new FCA a wider objective to promote competition, I sincerely doubt that anyone thought that we would end up here. The perspective that it was a standalone task, not a key aspect to be considered in wider work was and is a surprise. When I first questioned their Chairman on how he saw this objective being applied he offered little clarity on this and we have seen little clarification since.
We have to hope that the new Chief Executive is minded to reverse the direction of travel. The growth of legions of people all engaged in how well competition is operating in the markets is an escalating additional expense which the industry can ill afford. We still have the Competition and Markets Authority operating in addition to the FCA who can deal with competition abuse issues. Without any evidence, these groups are scouring the landscape to identify issues whilst there are obvious concerns about the existing behaviour of firms across the market. But policy and supervision are dull and yesterday’s currency. Better to be part of the new shiny competition team despite it having no real authority. However until we see a new Chair and better Board it is unlikely that the industry that funds the work will see more focussed work based on a tight budget and the real issues.