U.K. FCA Will Adapt Rules Using Consumer-Behavior Data

The Financial Conduct Authority will analyze consumer behavior and adapt its rules accordingly, said Martin Wheatley, the U.K.’s chief markets regulator.

The FCA will have a research arm to “really understand what is happening” in the consumer market, Wheatley, a managing director at the Financial Services Authority, said in a speech in London today. The agency will use the information to preempt crises and has the power to ban the sale of inappropriate products for as long as a year without consultation.

“We will use these new tools in a measured way,” Wheatley said. “And while we will act sooner, and more decisively, our approach will be based on a proper understanding of the issues and a full consideration of the potential solutions.”

Wheatley will become head of the FCA next year when the FSA is split into two separate organizations. The new agency will be responsible for prosecuting insider traders and market manipulators, as well as for U.K. financial-consumer protection.

Britain’s financial-services industry faces “a crisis of trust and reputation” after a series of mis-selling scandals, FSA Chairman Adair Turner said earlier this year. Barclays Plc (BARC), Royal Bank of Scotland Group Plc (RBS), Lloyds Banking Group Plc and HSBC Holdings Plc (HSBA) in July agreed to compensate small and medium- sized businesses that were improperly sold interest-rate derivatives.

Culture Change

Wheatley said he had seen evidence of financial firms changing their internal culture following the scandals.

“What I’m seeing is firms reassessing remuneration policies and moving away from the sales-driven approach,” Wheatley told an audience of reporters and financial executives after his speech.

Sixteen financial firms in 2011 paid 1.9 billion pounds ($3 billion) after the FSA found they improperly sold clients payment-protection insurance. Hector Sants, the regulator’s former chief executive officer, said last year customers may receive as much as 9 billion pounds from the PPI probe.

“The industry’s standing has suffered as the mis-selling scandals and other problems have taken their toll,” Wheatley said. “This has damaged the reputation of firms across the industry, whether directly involved or not.”

To contact the reporters on this story: Ben Moshinsky in London at bmoshinsky@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.