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The Financial Services Consumer Panel (FSCP) said that rather than dealing with the symptoms, the proposed Financial Conduct Authority (FCA) needs to deliver a quantum leap forward in tackling detrimental business models and protecting consumer interest.
The regulators in the past have been too occupied with the individual scandals like the payment protection insurance rather than weeding out the root cause, said FSCP vice chair Kay Blair today at an FSA conference where FCA’s proposed approach to financial regulation was initiated.
“We want to get rid of the ‘waterbed’ effect, where the regulator tackles one source of sector-wide misselling, another new problem all too conveniently rises up to replace it. This suggests the causes are systemic, built in to business models, rather than random events”, said Ms Blair.
“Over the last few years the FSA has undergone a sea-change in behaviour. However, if we are to see the new more effective regulation the panel has advocated, a quantum leap is now needed”, she argued.
The FCA will start functioning from 2013 from the FSA’s present Conduct of Business unit. Margaret Cole, the interim managing director while addressing a Which? conference in London yesterday said that the new regulator will intervene earlier to prevent consumer detriment and will be “courageous”.
She attacked the large financial institutions and banks for undertaking aggressive selling tactics and designing their business models around them.
“This industry has not shown us we can afford to trust it”, Ms Cole lamented.
Commenting on the business models of businesses, she said: “It is particularly striking to me that when we have been doing more business model analysis we see how much of the business models of major institutions are being driven by aggressive product sales. If that remains the business model there is always going to be a high risk of misselling products”.