The Association of IFAs is calling on the National Audit Office to conduct a review of the Financial Services Authority every two years.
Chris Cummings, director general of Aifa, called for the extension of the review, following the publication of the NAO’s report into the economy, efficiency and effectiveness of the FSA, which highlights areas where the FSA could improve.
The 100-page report suggests on the issue of performance management the FSA needs to enhance “its grip on information on the cost of its activities, and must over time seek to streamline the new Outcomes Performance Report”.
In addition the NAO says the FSA should focus on “working collaboratively with the Office of Fair Trading” and should “sharpen up its communication to stakeholders about its strategy and contribution”.
It also noted the issue of financial crime had received less attention than other elements of the FSA’s responsibilities, so it suggests it needs to “review the assessments it makes of firms and the skills and training of its supervision teams”.
And the report concludes as the FSA is a “world leader in financial capability”, it should build on this by “focusing on the costs of low financial capability and developing a medium term strategy for its financial capability programme beyond 2011”.
But Cummings says while the NAO report “rightly identifies that the FSA needs to increase its focus on demonstrating outcomes for consumers and markets”, he says the Aifa believes “NAO scrutiny should happen on a biennial basis”.
He adds: “The FSA has said the move towards a principles based regime will cost an additional £50m over the next three years. While we are generally in favour of the move towards principles, prudent financial management would suggest a thorough cost benefit analysis be undertaken to ensure that fair value is delivered.”
Stephen Haddrill, director general of the Association of British Insurers (ABI), says the NAO has confirmed the FSA has been moving in the right direction, particularly in its work on financial education and the shift to principles-based regulation.
He adds: “In many respects the FSA is leading the way as a financial regulator, both within the EU and beyond. This is especially important as we get close to the Solvency 2 Directive in the EU. This report is a further useful push in the direction of risk-based and outcome-focused regulation."
The report, which follows the review ordered by HM Treasury in June 2006, has been welcomed by Ed Balls, Economic Secrteary to the Treasury, who says it demonstrates the FSA has clearly established itself as the "unified UK financial regulator based upon the principle of proportionate risk-based regulation".
He adds: "I welcome the constructive response that the FSA has issued to the recommendations setting out how it intends to take them forward. I look forward to discussing progress at my regular meetings with Callum McCarthy and John Tiner."
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Nyree Stewart on 020 7034 2681 or email [email protected]IFAonline
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