The Financial Services Authority (FSA) today responded to the latest survey of regulated firms by the independent Financial Services Practitioner Panel.
Overall, the Panel's biennial report shows that satisfaction levels for larger firms, which have relationship managers at the FSA, and wholesale firms have improved since 2004. Lower scores continue for smaller retail firms, including mortgage and general insurance firms which have been surveyed for the first time since they were brought under the FSA's regulatory scope. Firms whose insurance intermediation activities are secondary to their main business feel particularly unhappy.
The report acknowledges improvements in the areas of relationship management, the FSA's willingness to provide guidance, the navigability of the Handbook and the overall treatment of small firms.
John Tiner, Chief Executive of the FSA, said:
"It is always useful to understand how financial services practitioners perceive us. We will set out our response to the issues raised by the panel in their latest survey in our business plan for 2007/08.
"Regulation is by its nature unlikely to be popular with the regulated. I do not find it surprising that wholesale firms are generally more content with us than their retail counterparts. I believe this reflects our view that there are greater market failures in retail financial services which, when combined with an explicit objective set by Parliament for us to protect consumers, means there is a need for more regulatory intervention.
"I am pleased to see that firms welcome our focus on more principles-based regulation and while I understand their concerns about its implementation, it is inherent in the approach that firms will get less prescriptive detail than was the case previously. They will need increasingly to exercise their own judgements about what business processes will result in a particular outcome. The FSA is fully committed to working with firms and their trade bodies to make this approach work effectively for the benefit of markets, firms and their customers. In the New Year I will be hosting a series of meetings with the leaders of large and smaller businesses to discuss how we can all make a success of this change in approach.
"During the last two years, there has been more structure to our relationship with larger firms in both the retail and wholesale markets and I am pleased that the benefits of this are recognised by the respondents. With regard to smaller firms, I note that on the one hand they acknowledge the positive difference the new Small Firms Division at the FSA has made. But they also express concerns about the intensity of regulatory change and the particular pressures this brings. We will be looking closely at the feedback from small firms in the report and will seek new opportunities to help with the impact of regulation as well as continue to provide dedicated workshops, web tools and road shows across the UK.
"Like the Practitioner Panel, we also take the question of the cost of regulation very seriously. Our Better Regulation Action Plan sets out what we are doing to reduce costs where justified. By the end of 2008 we will have reviewed activities which account for 80% of the administrative costs incurred by firms as a result of our rules. We have already taken significant actions in this direction – for example by moving the anti-money laundering requirements to a more principles-based approach with consequent savings of over £250 million per year. We have also proposed a more risk-sensitive approach towards the capital requirements of life companies resulting in reduced aggregate capital requirements of UK Life Insurers of some £4 billion."
Background
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The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
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The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.
