In its approach document, the regulator outlines how the FCA will deliver its objectives once it assumes responsibility for the overseeing the retail and wholesale markets from the end of 2012.
The FCA will regulate alongside the Financial Policy Committee (FPC), which will sit within the Bank of England and be responsible for protecting the stability of the financial system as a whole and macro-prudential regulation.
The Prudential Regulation Authority (PRA) will be a subsidiary of the Bank of England, supervising deposit takers, insurers and certain investment firms.
The government intends that the FCA will be more engaged with consumers, intervene earlier to tackle potential risks, and be tougher in its approach to deterrence and enforcement.
Hector Sants, chief executive of the FSA, said: “Trust in the financial services sector is at an all time low and the new regulatory arrangements provide the opportunity to restore confidence in an industry which has generated in excess of £15bn detriment over the last two decades.
“This document sets out the approach the FCA will be taking to improve regulation, a key element in restoring trust in the industry.
“For the FCA to be successful it must have the support of society and Parliament, and its objectives and approach must be clearly understood by all.”
He said the document was intended to stimulate debate about the details of how the FCA operates, with the proposed approach moving towards greater intervention.
But Sants added: “The question which needs to be answered is whether society is happy to accept the resultant costs and potential reduction in individual freedom.”
Margaret Cole, interim managing director of the conduct business unit, said: “We will now press on with developing our thinking on how to implement the approach set out in this document. We are clear that this will require significant investment, building on and improving what the FSA has achieved so far.
“I am confident that, if implemented, this approach will deliver significantly higher levels of protection than consumers have enjoyed over the last 20 years.”
The FSA will accept comments on the approach document until 1 September 2011.
