The story so far…
Politically, there’s a view that bureaucracy and regulatory caution is stifling economic growth. It’s particularly interesting in the current economic climate, that driving growth to stimulate the economy is paramount, but how do we safely marry confidence and protection of our financial markets to growth objectives that aren’t conflicting with our industry’s Consumer Duty.
The government has introduced steps for greater oversight in July’s Financial Services and Markets Bill. This issued the objective to regulators of supporting economic growth and increasing the consultation with the government in respect of regulatory changes.
If we look at all of the efforts and stability measures we have in place following the most serious financial crisis in over a hundred years – the 2008 banking crisis – the financial services industry would seem to be in better shape now than it’s ever been. Firms have embraced the stability, protection and consumer focus agenda with merit. Would we dilute this by merging regulators and what’s the cost of creating another swathe of regulatory impacts for firms to organise towards?
The same issues arose under the old FSA structure and in part there were challenges with decision making, knowledge, ownership and accountability. Although there’s noble sentiment in greater regulator responsibility and just as member and regulated firms in the industry are held to task, so should regulators perhaps – but do we need to collapse the framework and merge the regulators to achieve growth plans and will there truly be benefit in doing so?
If we look back to the FSA, there were tough lessons learned – we’ve moved forward and the reduction of independence, increased government involvement and a focus on growth, rather than stability, may not reap simplification or the benefits envisaged. History provides lessons of the regulator challenges in achieving consumer confidence in an organisation some deemed too fragmented and divergent to be truly effective or focused on the risks within the various industry segments. In an attempt to simplify these challenges and provide dedicated expertise and governance following the 2008 financial crisis the FSA was divided under the then Chancellor George Osborne to form the structures we see today with the PRA and FCA. Here’s an interesting read from the government publications in 2010 when the FSA was disbanded.
“History provides lessons of the regulator challenges in achieving consumer confidence in an organisation some deemed too fragmented and divergent.”
All of our current financial services regulators are purposely independent of the government and are self-funded – it’s said that this approach has been key in maintaining an unconflicted path with growth, competitiveness and control with governance carefully managed. If we merge and move towards our regulators focusing on too much growth, would we see conflicts arising that are detrimental to the health and stability of consumer confidence?
This potential change and the objectives that come with it could result in further highly challenging and ongoing active regulatory pathways ahead. In the current climate, would we as an industry support this move, when we know from history that regulatory change has stark industry impacts; costs, time and resources applied to the regulatory landscape has not been insignificant. Could we embrace this with the same gusto, because it’ll bring further consumer protection or market efficiencies and growth opportunities, or do we feel this is a step too far?
At Grath we empower firms to manage their risk and regulatory obligations and controls, but we can’t help wondering if we may be collectively better off focusing on further strengthening, with our current regulators remaining intact. Would you advocate this change or prefer to spend precious resources more wisely to continue to drive protection into our now ‘well-functioning’ industry?Having worked with clients over many years, Grath understand that in some places, current regulations could further benefit from simplification, but we want to know how you feel as an industry about this potential – can we really consider a merger of the regulators and potential for conflict with growth objectives, particularly when we’re mid-flight on Consumer Duty and driving further to compete to protect consumers from harm.
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