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 Martin Wheatley, chief executive of the Financial Conduct Authority
(FCA), struck a more conciliatory note after lawyers have criticised
the year-old watchdog for being heavy handed and effectively vetoing
new products.
The FCA was launched in April 2013 to protect consumers better after
a string of mis-selling scandals ranging from loan insurance to
pensions spanning several decades.
Wheatley outlined plans to encourage more innovation in financial
products, especially around rapid advances in technology such as
using mobile phones for banking and investments online like "peer to
peer" lending.
He said a market that works well is one that allows for much-needed
innovation as the "middle ground" of consumers were not being served
well, partly because firms argue that a welter of new rules make it
harder to come up with new products.
The need for innovation is also being fueled by the UK government's
decision to end compulsory annuities for people with retirement pots
after the FCA called the market disorderly.
The FCA's predecessor had told the industry to be "very afraid" but
Wheatley said this was at the height of the 2007-09 financial crisis
when taxpayers had to rescue banks.
"The tone is different because I think we recognize that our core
objective of making markets work well is not just served by locking
down everything that could go wrong," Wheatley told a Bloomberg News
event.
Next month the FCA will begin a public consultation on how limited
or simplified automated advice could be given to customers online
without the financial firm having to comply with the full panoply of
regulatory safeguards.
The watchdog will look at ways to make disclosures to customers more
meaningful, Wheatley said as he criticised an unnamed bank for
having terms and conditions on its basic bank account that are
longer than Shakespeare's Macbeth.
INNOVATION HEAVEN
The FCA will identify barriers to innovation and set up a hub to
give compliance advice for innovative products. There will also be
an "incubator" to support innovative businesses as they seek
authorization from the watchdog.
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Wheatley said London has the capacity to become a European
trendsetter in a booming tech scene and create an "innovation
heaven", though there won't be a return to the pre-crisis "light
touch" regime.
"We want firms to have the freedom to break new ground, but there is
limited societal appetite to accept more scandals in the industry,"
Wheatley added.
As economic recovery gets underway, there is also risk that
over-confidence sets in with lobbying to unpick reforms, which would
be dangerous, he said.
The FCA's wriggle room to encourage innovation and offer "waivers"
from some rules will be limited by the European Union, whose
financial watchdogs are already moving onto the retail turf,
encouraged by national supervisory failures in the past.
The European Securities and Markets Authority (ESMA), and EU
watchdog, will get powers to go over the heads of national
supervisors to ban a harmful products. Transparency and disclosure
requirements in markets covered by EU rules, such as mutual funds,
are also being toughened up.
"Clearly where there is very definitive rules in the European
framework, then they have to be complied with. Our flexibility will
be to look at principles and outcomes as much as we can," Wheatley
said.
(Reporting by Huw Jones; editing by Susan Thomas)
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