People want a strong financial watchdog but don’t think that the Financial Services Authority (FSA) has done enough to help consumers, according to new research by Which?.
In August this year, we ran a general public survey of 1,266 adults in the UK. Some 73% of those who knew what a regulator was thought that the FSA wasn’t effective at standing up to banks in the run-up to the financial crisis.
Eight in ten (82%) felt that the financial watchdog needs to have more power to force the banks to change.
Which? chief executive, Peter Vicary–Smith, said: ‘People are crying out for a strong financial regulator that fights on their behalf.’
Banks need to do more for consumers
Although there was widespread agreement that a financial watchdog is needed to ensure that banks treat their customers fairly, only a third of people surveyed thought that the FSA had managed to deliver this for consumers.
However, it’s not all down to the regulator. Banks clearly need to do far more to regain customers’ faith in them – as 76% of people didn’t think banks could be trusted to regulate themselves.
Financial Services Authority
The UK is moving to a new model of regulation. The FSA is being split up and the Financial Conduct Authority (FCA) will be responsible for regulating conduct in retail and wholesale markets.
Which? chief executive, Peter Vicary-Smith, said: ‘This is a once in a generation opportunity to get this regulation right. The FCA has the potential to stand up for consumers’ interests, but it will need to be tough and proactive. The new regulator must act to stop commission driven sales, tackle poor products and should hand down fines and punishments that act as a real deterrent against bad practice by the banks.’
New regulator – Financial Conduct Authority
Which? would like the new regulator to achieve the following:
- Take a far more proactive approach and be willing to tackle the ‘root causes’ of consumer detriment – like poor quality products and inappropriate remuneration and incentive structures. Tackling these issues early is much better for consumers and the industry than waiting for the mis-selling to happen and cleaning up afterwards.
- Competition should be seen as a means of benefiting and protecting consumers rather than an end in itself. This is what we mean by ‘effective competition’
- Proper accountability requires transparency. At the moment, the regulator is constrained from publishing information which might benefit consumers by the legislation. The regulator’s enforcement and penalty regime must offer a credible deterrent. Fines have got to be far higher.
Peter Vicary-Smith gave evidence to the Treasury Select Committee on Wednesday 2 November outlining Which?’s vision for the FCA.