The Conservative peer, who has recently been vocal in his opposition to the Retail Distribution Review, made his comments during the latest debate on the Financial Services Bill in the House of Lords.
He was speaking on an amendment calling on the new regulators to act “proportionately, reasonably and fairly” in its investigations.
“The reaction of regulators to being criticised for what were described as the failures of light-touch regulation have increasingly led to a much more tough-guy, macho approach by them,” he said.
“In turn, I find major, totally responsible financial services businesses saying to me when they are unhappy and think some regulatory proposals are mistaken: ‘But we don’t want to talk to the regulators in case they punish us’.
“An unfortunate culture has developed of seeing the regulators as being very likely to use their powers against you, if you fall out with them.”
Although the amendment, presented by former Tenet chairman Lord Hodgson of Astley Abbotts, was ultimately withdrawn, it attracted support from a number of other peers.
Among them was Viscount Trenchard, who expressed concerns that businesses were having to spend too much time working on how to respond to the regulator’s demands.
“There is a real fear of increased supervision and a more intrusive approach and, nowadays, many firms spend very little time talking about how to develop and to expand the business in order to provide further employment and earn more money so that the business can be consolidated and maintained in London,” he said.
“In carrying out an investigation, the regulator must have regard to its regulatory principles and act proportionately, reasonably and fairly.
The Financial Services Bill will now move on to its report stage in the House of Lords, where there will be further line by line examination.
