The chairman of the Financial Services Authority (FSA) has suggested Parliament will have to give the Financial Conduct Authority (FCA), one of its successor bodies, even greater powers to protect consumers.
In a speech delivered to the Mansion House in the City last night, Lord Turner addressed the roles of the bodies which will form the core of the new regulatory system: the Financial Policy Committee, the Prudential Regulatory Authority and the FCA.
He said the last 20 years had been "punctuated with too many waves of mis-selling" and said the core problem was the "complexity of many financial products and the inequality of knowledge between salesman and customer".
This, he said, explained the need for a more preventative approach, as set out in the FCA approach document earlier this year, as the "pattern of the past is not acceptable".
He added: "New capabilities within the FCA and some new powers provided by Parliament will be needed to make it a reality."
Turner also detailed how detecting where firms were making money would be a key analytical tool, suggesting it would have shown the high margins earned on payment protection insurance.
He highlighted the two new powers which would be required by the FCA:
- The power, if necessary, to demand changes in product terms or even in extremis to ban a product.
- Strengthened powers to tackle misleading financial advertisements, if necessary requiring their withdrawal.
Concluding his comments on the FCA, he explained some of the trade-offs which would have to be debated, including the one between more intense supervision and higher regulatory cost and another between regulation and customer choice.
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