Following the Equitable Life debacle, the square mile is bracing itself for life under the all-powerful FSA
For once, a week without interest rate cuts. The markets may be languishing but there is plenty of activity for investors to observe and digest. In the UK, the investment industry is bracing itself for the accession of the Financial Services Authority, set to be the most powerful financial regulator in the world. Basically, if you have ever handled money or engaged in a commercial transaction, you now answer to the FSA.
Banks, building societies, friendly societies, insurance companies, (indeed, any companies), investment managers, traders, brokers, analysts, public relations agencies and financial media outlets are all under the knotty thumb of Sir Howard Davies and his battalions. Those regulated are always grumpy about what they see as intrusive surveillance. But the City, not to put too fine a point on it, is already fearful and resentful, in equal measure, towards this new boss.
The Authority has all the power, and for the moment, all the glory, and the chiefs seem to like it that way. However, big portfolios carry weighty responsibilities and the FSA has already proven vulnerable over the Equitable Life affair. Will the super-regulator reign for ever and ever?
Like corporate cycles of consolidation and diversification, regulators re-group and split up according to the political perception of their effectiveness. The higher they rise, they harder they fall.
Sir Howard's term runs to the end of next July. By now the global economic slowdown widely predicted for mid-year should have been picking up again. That would have provided a pleasant backdrop to the smooth launch of the FSA. But 11 September changed all that, adding emergency anti-terrorist financial measures to a work schedule including consolidation among European stock exchanges, the introduction of international accounting standards and the new FRS 17 requirement for pension funds.
The files are not yet closed on Marconi, or Railtrack. Would it be 'market abuse' ' a new offense from 1 December, which carries unlimited fines ' to suggest there are other insurance companies that may be struggling, even as Equitable Life is? Is this a false and misleading impression of the market? Or should we be told if there are already doubts? Unsurprisingly, investors caught in this maelstrom of highly political activity have frozen new commitments.
Some are waiting to see what turns up in the Budget review. Will Chancellor Gordon Brown loosen his grip a little with a smattering of tax cuts to help UK plc keep its head above water? Is this the opportunity to bury a hike in National Insurance contributions? Amid mutual assurances of their deep and lasting friendship, Prime Minister Tony Blair promptly upstaged his buddy's annual star billing with a bombshell about the 'tragedy' of missed opportunities in Europe and hints at a timetable on a euro referendum.
It is clear that Westminster is feeling left out already. The countdown has begun to E-day ' the launch of euro notes and coins as tender in the 12 founding members of the eurozone. While the war in Afghanistan continues, government resources are focused on the anti-terrorist campaign, but once this has been dispatched, Europe will be back on the agenda.
Putting the tech into protection
Square Mile’s series of informal interviews
Fallout from Haywood suspension
Launching later in 2019
£80bn funds under calculation