In a speech delivered to the Mansion House in the City last night, Lord Turner addressed the roles of the bodies which will form the core of the new regulatory system: the Financial Policy Committee, the Prudential Regulatory Authority and the FCA.
He said the last 20 years had been “punctuated with too many waves of mis-selling” and said the core problem was the “complexity of many financial products and the inequality of knowledge between salesman and customer”.
This, he said, explained the need for a more preventative approach, as set out in the FCA approach document earlier this year, as the “pattern of the past is not acceptable”.
He added: “New capabilities within the FCA and some new powers provided by Parliament will be needed to make it a reality.”
Turner also detailed how detecting where firms were making money would be a key analytical tool, suggesting it would have shown the high margins earned on payment protection insurance.
He highlighted the two new powers that would be required by the FCA:
- The power, if necessary, to demand changes in product terms or even in extremis to ban a product.
- Strengthened powers to tackle misleading financial advertisements, if necessary requiring their withdrawal.
Concluding his comments on the FCA, he explained some of the trade-offs that would have to be debated, including the one between more intense supervision and higher regulatory cost and another between regulation and customer choice.
