FSA stay of execution?
Rather like a magic eye picture, what was once a confusing jumble has slowly turned into a more definitive landscape, following the formation of the Conservative-Liberal Democrat coalition. Given the sometimes opposing views of the two parties, not least when it comes to short-term economic policy, it is still far too presumptuous to predict with any confidence what the future will hold for the financial services industry. Rumours abound; the 40% tax relief is likely to be scrapped, major banking reform is imminent, child trust funds are to go. The other major talking point is likely to focus on the future of the Financial Services Authority (FSA).
In July 2009 the Conservatives outlined their plans to abolish the FSA, passing regulatory duties of the banking market to the Bank of England, with a new Consumer Protection Agency (CPA) taking responsibility for IFAs, mortgage and insurance brokers and stockbrokers. The FSA were so worried that according to Money Marketing their chief executive, Hector Sants, emailed his staff on Election Day to remind them of this very fact.
However, under pressure from their new political allies, it has been reported that the Conservatives are now likely to back-track on plans to scrap the FSA. The Bank might retain ultimate oversight over banking supervision and control systemic risk, but the Liberal Democrats believe that the FSA should regulate individual banks, hence its stay of execution.
The FSA has continued to attract criticism from the IFA community over a number of issues such as high fees and a perceived lack of interest in targeting bad practice within banks, so arguably only a minority would mourn its passing. The fact that it could now survive will raise more questions than it answers.