Much of the debate around the splitting
of the old FSA into two had focused on the structural implications
of regulation, but only know is the potential implications of the
culture of regulation, particularly under the FCA as conduct
regulator becoming clearer.
Richard Hobbs runs his an expert eye over
some of the new emergence themes - the new competition powers, the
focus on behavioural economics, the challenge for firms to
understand and engage with the new culture rather than merely don
Above all, can the regulators escape from
their current vulnerable political position and risk a more adult
relationship with its regulated community amidst the glare of
public scrutiny over financial services?
In many respects, the advent of the
Financial Conduct Authority (FCA) is nothing new. Financial
regulation has been reformed a number of times over the past
quarter of a century. However, there are signs of a fresh approach
to conduct regulation by the FCA.
There has been change in the objectives of
conduct regulation. The FCA has been given an overall strategic
objective (to ensure that markets function well) and supplementary
objectives - including the new 'promotion of effective competition
in the interests of consumers'.
The FCA is setting a lot of store in
behavioural economics - in contrast to its predecessor, the
Financial Services Authority (FSA). Such an approach suggests an
organisation open to, and willing to embrace, change.
Although there has been little immediate
staff turnover between the FSA and FCA, the latter's recruitment
priorities, including hiring competition economists and former
practitioners, highlights another shift in regulatory
Despite being a "new organisation", the
reality is that the FCA remains a political football, as the FSA
was before it - providing ministers with protection when things go
As the FCA tries to shake off the past and
create its own, innovative path, it will need the help of firms.
The industry should be prepared to put its best foot forward,
ensuring that the good of the consumer is at the forefront of their
The jury is out on whether conduct risk
regulation will change in the UK - but the initial noises coming
out of the FCA regarding a different approach are positive. The
question is whether politics and the industry will enable this to
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