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RIP the FSA!

It is official, The Financial Services Authority is no more as it has not been able to put an end to the financial crisis.

It is time that financial regulation steps in. This will be a lot more focused on enforcing financial stability and pushing customer’s interests.

According to the chancellor with these new regulations and laws that are being introduced retail banks are being separated from the wholesale banks, a new Bank of England Governor means that 2013 is the year that banking will be rebooted.  Banks are on a massive clean-up job, the industry has had to change because the regulations changed.

We can see the differences already

The Financial Conduct Authority (FCA) allows access to financial services, promotes competition but protects consumers.  With this control of financial products it means that consumers will get a fairer deal.  The FCA will be able to intervene and act quickly if customers are not getting a very fair deal.

The Bank of England has a Financial Policy Committee (FPC) they prevent any financial emergencies that could happen in the future and looking out for any financial potholes that are on the horizon.  So these are the people to blame if the next financial crisis doesn’t get spotted.

The Prudential Regulatory Authority (PRA) stop banks from collapsing and they answer to the Bank of England but have the ability to direct institutions individually to hold more funds and capital.

These changes are welcomed, long overdue and should help the economy.

Banks have increased their levels of capital to make sure that they have more stability and have created “living wills” so that if they hit danger they can be stabilised or if they collapse the economy will not be hit too hard. The taxpayer will not have to come to the rescue!

After the banking error previously people wanted the people responsible to be penalised understandably and to a certain degree this has happened. 90% of board’s members of the bank have changed.

A lot of bankers were given huge rewards for taking huge risks with other people’s money. Now by law any bonuses will be paid in shares and then deferred so that gambling by the bankers is not rewarded. Instead long term performance of companies will be rewarded. Total bonus pools have now dropped by 55% and instant cash bonuses have now dropped by 77%

Because of all the scandal and criticism, banks are becoming more customer focused. They have to because no business can survive without giving their customers what they want to an extent. 

The banks have come a long way in their reforms but are not in a position where everything is rosy just yet.  Ethical and professional standards clearly need to be raised within the industry.  These new regulatory boards should enable these standards but they have to be careful not to damage the consumer’s interests and the economy by going to far as is the temptation after a large failure.

The FPC and PRA cannot clamp down on economic activity so much so that no movement or growth can occur. They will not only protect the consumers but must ensure that there is competition within the financial markets meaning that customers will be able to access any financial services that they need and will have more choice. 

New rules on financial advice have been implemented and has left many bank branches discontinuing financial advice services.  The industry is moving towards a fairer future for all.  


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