Financial Services Authority - regulation is bust - not fit for purpose

 

 

Financial services regulation in the UK is a mess. The manner in which regulation has been set up and run has added to the crisis. It has regulated the wrong things in the wrong way very badly. It has increased risk. The main achievement of the FSMA 2000 is that compliance departments end up running the business. It works like this. A banker has an idea for a new product. He takes it to his boss. ‘Before I even look at this, can you confirm that compliance has seen it and approved it?’. ‘No’. ‘Get them to check it and then come back’. ‘OK’. Later. ‘Compliance says it complies’. ‘Right, is it going to make money?’. ‘Yes’. ‘Get on with it’. In other words the bank or whoever never really thinks about the product. It relies on its compliance department. This is no good as compliance departments are staffed by people who are attracted by rules. They are especially delighted when the rule books are wonderfully, convolutedly prescriptive. They can spend hours playing games with the language and the rules. If the rules can be satisfied by a check box system, even better. Common sense is evident by its absence. The current regulatory regime is not only useless with its divided responsibilities it is useless because it is prescriptive and wildly over-complicated. It needs to be scrapped. Simpler regulation, or rather supervision, by experienced market professionals would be far more effective. The FSMA 2000 must be repealed.