The Financial Services Authority said yesterday that an independent survey of industry views about the financial services regulatory regime provides a valuable insight which will help the FSA as it continues to develop the system of financial regulation.
FSA Chairman Howard Davies says: “The FSA was officially launched at a time when the profitability of individual firms was under pressure. Against that background, it is not surprising that the costs of regulation are particularly under the spotlight. We will use the findings in this report to help us make our regime more cost-effective in the future.”
The FSA notes many positive aspects of the Practitioner Panel's report such as:
By a margin of almost three to one, chief executives of the larger firms believe strongly the new regulatory regime has been either very or fairly beneficial. This opinion is reflected within the other two groups surveyed – heads of compliance and smaller organisations.
The report shows continued support for strong regulation. The FSA is seen to be taking a firm line with businesses which break the rules.
The FSA is also seen to be listening to consumer views when deciding its policies. On balance, firms believe that regulation has been good for the consumer.
The FSA also notes that firms of all sizes believe there have been too many regulatory reviews of the financial services industry, and also that if there are to be more in future these should be conducted by the FSA rather than by a government department.
The Practitioner Panel identifies three areas of concern about the FSA's performance – individual guidance, accessibility of the Handbook and the costs of regulation:
It was to be expected that in the early days of the new regime the demand for guidance and rule waivers would be particularly strong. We accept that we have not fully met expectations in this area. We now have a business improvement programme designed, among other things, to streamline our processes for giving guidance to firms;
The FSA agrees that its Handbook is substantial and accepts that some firms have found it difficult to navigate. The FSA has already developed a Specialist Sourcebook for credit unions and is preparing further such Sourcebooks for the new mortgage and general insurance regimes. In other areas we have developed Specialist Guides, signposting those elements of the Handbook which apply to particular market sectors, for example oil market participants. In the next few months we shall be launching an improved version of the Handbook on our website which will be easier to navigate and will provide the platform for further improvements in its ease-of-use during 2003;
We are concerned at the evidence in the Report that the costs of regulation have gone up.
In our experience there appears to be little direct relationship between the amount of money which firms spend on compliance and the resulting outcomes – some firms deliver effective compliance on a modest budget, whilst others spend considerable sums on compliance, but with unsatisfactory results. So we are commissioning a pilot research project to consider this question further and to help us understanding these diverging patterns of expenditure and outcome.