Someone once told me that a good mission statement should fit on a t-shirt. So the 50-page mission document for the Financial Conduct Authority (FCA) is a good read, but a bit on the long side. We recently submitted our response to it, and here are my six key messages for the FCA.
Less regulation, more focus on the customer
My five years at the CML have been dominated by the Mortgage Market Review (MMR), Mortgage Credit Directive (MCD), Financial Policy Committee (FPC) powers of intervention and now the market study. That list could be expanded, and I do not complain. I knew what I was signing up to. But the next five years should surely not have such a strong regulatory theme.
The price of constant revolution in regulatory approach is often a corresponding lack of focus and resource on evolving customer need. The welcome references by the FCA to competition should include giving room for the market to breathe, compete and innovate.
Delivering the spirit of regulation
I would like to see a continual emphasis on proportionality. Regulatory machines grind small. Lenders respond by grinding smaller still. Clarification is piled upon interpretation, and woods and trees seamlessly merge.
I would like to see firms spending as much time understanding and responding to the spirit of regulation as they currently devote to unpicking its textual significance. But this depends on regulators consistently demonstrating that they too live by the spirit of regulation and are less concerned with the technical foul.
Working with the industry
I hope that there will be opportunities for collaboration in the interests of finding speedier solutions to issues which impact on market operation, but are not related to the conduct of individual firms.
How the industry worked with the FCA on what became guidance on handling arrears was not perfect; nor was the outcome. But it happened quickly and was better than if the solution had been devised behind closed regulatory doors.
Silver bullets are duds…
Let’s be clear on silver bullets. Regulatory commentators often identify those which put the sector irrevocably on the path to salvation; but they are always duds. I have lost faith in them. The quest for them is like the Hunting of the Snark – doomed to failure.
Co-ordinating regulation and broader policy goals
A mission cannot exist in a vacuum. So I was encouraged to read the FCA’s discussion on its interface with public policy. Regulation is an issue whose tentacles cross into most areas of economic life. It has to work in full knowledge of what else is going on – and not simply regard its own goals as inviolable.
I welcome the FCA’s alertness to the cross-winds of public policy. It may well be tested in areas such as custom-build construction and shared ownership, where regulatory requirements, not just from the FCA, may inhibit the growth of particular activities.
Which brings me on to my favourite…
The law of unintended consequence
You are never free of it and a desire to avoid it at all costs leads to paralysis, not clean decision-making. But a regulator needs to be alert to its impact and – with the help of others – nail down what those consequences might be, and how or whether they could be addressed by some slight re-focus.
It is the blithe ignorance of unintended consequences which does the damage, so its examination should be part of the process.
In summary, a recalibration of the FCA mission is no bad thing. I suspect that this document is by no means its last word on the subject. But it is a good kick-start to the debate.