Its the end of the FSA – But will the PRA and FCA do any better?

25th January 2012

The "Financial Services Authority" is due to be removed. Don't worry about the landlord, however, as the building will overnight transmute itself in the home of replacement regulators Prudential Regulatory Authority and Financial Conduct Authority.

The PRA will supervise banking and wholesale money markets under the auspices of the Bank of England.  It is the FCA that is of more direct interest to investors. It will do the "consumer" stuff – protecting the likes of savers, borrowers, insurance buyers and individual investors.

And even before the new brass plates are screwed to that Canary Wharf façade, the two organisations will start in a semi-official form as the existing FSA staff is split into the two new regulatory bodies. This will happen in April.

As far as both consumers and the "heavier" end of finance are concerned, the FSA was not a success.  Lampooned in Private Eye as the Fundamentally Supine Authority, it failed to prevent the banking meltdown as it admitted in the FSA report on Royal Bank of Scotland (which, it now transpires, redacted criticism of RBS former boss Sir Fred Goodwin following complaints from his lawyers).  And, of course, it ultimately failed to prevent publication of the lengthy report – it had originally hoped to get away with a short press release.On the consumer side, there was a long litany of stable door shutting from mis-sold payment protection insurance to mis-sold structured bonds via regulated "boiler rooms" which pushed overpriced shares in companies with little substance traded on fringe markets. In the case of PPI, it took the best part of a decade between the first media criticism of the high cost and often inapplicable plans and the eventual shut-down of the product and billions in compensation.

The FSA flip-flopped from "light touch" regulation to a post financial crisis heavy attitude – including the odd dawn raid on dodgy dealers and more prosecutions of insider traders.

Now, with just weeks before the FSA makes its de facto split, the FCA charm offensive is under way. New FCA head, Martin Wheatley, in an interview with The Financial Times promises "we will be looking at things from a consumer perspective."  He will have "expanded powers" to deal with firms.

What's on the agenda?

What's still to be clarified or not on the agenda?

Whatley told an industry audience earlier this week.

"The FCA will need to ask tougher questions, and they need to be the right ones, if we are really going to discover what lies at the heart of your firms' successes and failures. The FCA then needs to make better, bolder, faster decisions. We all have to walk in the footsteps of your customers to understand their perspective and to be able to deliver the new approach. 

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