Belfast Telegraph

FSA pledges reform of regulation regime

Some financial products could be banned and price caps could be imposed on others as part of a radical rethink of the way consumers are protected, the City watchdog has warned.

The Financial Services Authority (FSA) plans to introduce a new "more intrusive" approach to regulation after its chairman, Lord Turner, conceded that the previous regime had failed to prevent "waves of severe consumer detriment".

Under the new approach, providers may have to get certain products, which had caused re- occurring problems for consumers, pre-approved by the regulator.

In extreme cases, products that had the potential to cause significant losses to people or were repeatedly being mis-sold could be banned, or providers could be prevented from selling them to certain groups of consumers.

The FSA, or its successor the Consumer Protection and Markets Authority, would also look at introducing price caps on fees and charges, particularly where firms appeared to be making excessive profits.

Other possible changes include introducing "wealth warnings" on products which would be similar to the health warnings that appear on cigarette packets.

These would occupy a set position on promotional literature, be in a set font size and contain "bold and clear" warnings.

Certain products, which were not suitable for the majority of consumers, would only be allowed to be sold to people alongside expert advice.

Overall, the new regime would aim to ensure potential problems were spotted early and corrected before too many people lost out.

The FSA has already begun to shift towards a more interventionist approach, with tighter supervision of product development, and it has launched a discussion paper on how this should continue.

But FSA chairman Lord Turner warned that while a "significant shift" in regulation was required, there were important trade-offs to be made between protecting consumers but not limiting choice.

He said: "The crucial issue is how far along this spectrum of earlier and more intense interventions we should progress.

"Our analysis has led us to the conclusion that a shift in approach is required but there are important trade-offs to be struck."

Popular