FSA chief executive Hector Sants warned in March that people should be frightened of the regulator.
But Wyles says: “I would support robust action where individual firms have got it wrong and their customers have suffered. A culture of mutual respect will be more potent than one based on fear.”
He also called for a more adult and open relationship between regulated firms and the regulator.
He says: “If we throw the innovation baby out with the toxic asset bathwater, we will end up with a market that functions less well.
“Put another way, what we need is a more adult and open relationship between regulated firms and the regulator in which there can be an informed debate about business developments before they happen, not a slap on the wrist after the event as the FSA decides it does not like the outcome (with the benefit of hindsight).”
For a competitive, innovative and vibrant mortgage market to return, he says we need more diversity – small lenders as well as large ones, specialist lenders as well as banks and building societies.
He does not want to see a UK banking system which is more hidebound by liquidity, capital and credit risk controls than its international peers – that would not be good for UK plc either.
He says: “I think we’d all recognise that what we do want is market that behaves, and is encouraged to behave, more rationally than it did in the recent past. Competition is vital to achieving positive outcomes for consumers, right up to the point where herd instinct starts to drives us towards the edge of the precipice.
“And we must ensure that the regulatory system protects both us as lenders, and our borrowers, from he risk of unscrupulous intermediation, in which the primary driver is not aligned with the customer’s interests.”