How can the FCA become smaller if its remit keeps getting bigger?

The Parliamentary Commission on Banking Standards wants a slimmer FCA focusing on the big issues. Here’s the relevant quote.

“A strategic aim of the FCA should be to become a smaller, more focused organisation. The commission recommends the FCA replicate the Bank of England’s stated intention for the PRA to operate at a lower cost than its equivalent part of the FSA, excluding what is required to fund new responsibilities. The FCA should set appropriate timescales for implementation of this recommendation.”

But short of dumping the RDR what exactly, can the FCA do to achieve this focus?

One can look to history of course, to see how focus was lost. In the run up to the banking crisis, I heard countless IFAs say that FSA was looking in the wrong places. The advisers said it was the bigger players and usually the banks where things were going wrong. I suspect a lot of these comments were referring to the industrial scale fast-tracked lending, much of it was about poor bancassurance advice though sometimes about private banking advice too. A few wise advisers probably were referring to the whole show getting out of control.

There is something in this of course, but retail advice hasn’t exactly had a totally clean bill of health. And what would an FSA looking at banks more closely, managed to have stopped what was going on? Would it even have acted given what we now know about its concerns regarding RBS and the failure to act?

One area where IFAs were definitely bang on the money was the treating customers fairly initiative. The Money Debate thinks the whole concept was complete idiocy reducing otherwise intelligent middle ranking regulators to box ticking, sound bite repeating automatons with all the independence of mind of early Blair years New Labour backbenchers.

It is also pretty obvious that the FSA was scared and scarred by, variously, endowments, pension misselling and Equitable. It was guilty of not just fighting the last war, but of fighting it on three fronts.

But you could arguably attach some blame to the fact the government dumped mortgage regulation on its doorstep. The FSA did not want it. It got it with all the accompanying additional calls on management time. And guess what. Now the FCA is being handed regulation of consumer credit. The FCA hasn’t actually said whether it wants or not. But look at all the additional calls on management time.

It’s got fewer IFAs to look after now but rather a lot of RDR detail to consider. Smaller and more focused? The Money Debate doesn’t think the FCA has got a hope of becoming that any time soon.

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