At a Treasury Select Committee evidence session on the role of the incoming Financial Conduct Authority (FCA), representatives from the fund management and insurance sectors warned regulatory overlap in the new regime could be a “recipe for disaster”.
Its evidence session was part of TSC’s ongoing probe into the new regulatory body.
The FCA will be responsible for regulating the conduct of all firms, including the insurers, deposit-takers and small number of investment firms who will be regulated by the new Prudential Regulation Authority (PRA).
Paul Killik, senior executive officer and Partner at Killik & Co suggested the FCA could be a subsidiary of a “superior” PRA in order to prevent “turf wars” breaking out between competing regulatory bodies scrapping over what constitutes prudential and conduct business.
Philip Warland, Fidelity head of public policy, called for clearer remits for the two bodies.
“The overlap in objectives of the PRA and FCA seems to be a recipe for disaster and we would prefer to see something clearer.”
External bodies such as the Office of Fair Trading could play a role in addressing conflict of interest issues between investor protection and competition, he said.
Angus Eaton, Aviva operational and regulatory risk director, told MPs double regulation could “drive up costs to consumers”.
Industry figures also called for the FCA to have more accountability. Fidelity suggested the FSA successor body should make annual representations to the TSC.
Killik said he would like to see the regulator justify its actions to a superior PRA.
Meanwhile, those giving evidence questioned whether the FCA has the necessary skill-set to achieve its more interventionist objectives.
Killik mooted the idea of creating a panel of retired professionals to give advice to new FCA staff.
Elsewhere, both Fidelity and Aviva expressed concern the over-use of FCA warning notices to firms could undermine already “delicate” confidence in the financial services sector.
Today’s hearing comes after the TSC published the terms of reference for its inquiry into the FCA last month.
