FSA moves to cut red tape

FSA moves to cut red tape

Stung by criticism that it operates an overly prescriptive compliance regime, the Financial Services Authority (FSA) has published plans to reduce the cost and burden of regulations on UK firms.

Earlier this year the FSA was attacked by City business leaders for its heavy-handed compliance requirements. In an open letter to the FSA, the Centre for Policy Studies accused the regulator of being "an increasingly defensive and risk-averse organisation", which had contributed to a culture of prescriptive and increasingly complex regulation.

In today's statement, the FSA admits that better outcomes will be produced by encouraging firms to focus on the best actions to take in a particular situation, rather than following a mechanistic process.

In its Better Regulation Action Plan, the FSA summarises more than 30 improvements to the way it regulates, including introducing simpler, more up-to-date listing rules, removing barriers restricting access to retail financial advice and lifting audit requirements for smaller regulated firms.

The watchdog says it will also encourage the industry to find solutions for problems relating to soft commissions, bundled brokerage and contract certainty, and will only impose regulation if the market failures remain uncorrected.

Says John Tiner, FSA chief executive: "A shift towards a more principles-based approach will take time to implement, as much care will be needed to ensure that we retain rules that clearly add value in maintaining efficient orderly and fair markets or helping consumers secure a fair deal. Ultimately, though, this approach will produce better outcomes for both consumers and the financial services industry."

But the FSA warned that the plan also sets out areas where regulation may increase, particularly with the required European directives, which it is obliged to implement even if they would fail a cost-benefit analysis from the UK's viewpoint. But it says it will not "gold-plate" EU directives and will only add requirements only when they are justified in their own right.

Earlier this year FSA chairman Callum MCarthy questioned the benefits of the EU's Markets in Financial Instruments Directive (MiFID), which are expected to be introduced in November 2007.

The FSA is currently working with the Financial Services Practitioner Panel on a parallel piece of work that will examine that costs of regulation to UK firms. Initially scheduled for release early next year, the publication deadline has now been pushed back to the second quarter of 2006 to allow time for further data collection.

Comments: (0)

Visit apc.com
DocuSign - 4 best practices for banking CIOs to digitally streamline operations. Get the guide

Trending Stories