Banks in the U.K. don’t need to be afraid of the new finance regulator, its chief executive officer said today, reversing the mantra of the previous top official at Britain’s financial-oversight agency.
“You won’t hear from us the ‘be afraid’ tone,” Martin Wheatley, the CEO-designate of the Financial Conduct Authority, told reporters today. His predecessor at the Financial Services Authority, Hector Sants, had said banks “should be frightened” of the regulator.
“We want to get back to us having a discussion with the CEO’s of firms,” Wheatley said.
The change in tone marks a shift in the approach to regulating the finance industry as the FSA splits on April 1 into the FCA, a consumer-focused watchdog, and the Prudential Regulatory Authority, a unit of the Bank of England that will focus on systemic issues. The move is part of a supervisory overhaul in the wake of the financial crisis that saw the nationalization of Northern Rock Plc and the bailouts of Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc. (LLOY)
The FCA will have new powers to ban risky products at an early stage, to intervene in how banks (SX7P) market products, and to publish warning notices of investigations before they are settled with the target of the probe. Its “most significant new power” is to promote competition in the sector, Wheatley said. The FCA will have oversight of consumer credit as soon as next year, he said.
There will also be less focus on supervisory visits to regulate firms and more emphasis on corporate governance, product design and sales processes, Wheatley said. The FCA will pick individual topics of concern and visit firms based on their involvement, he said.
Wheatley, the former CEO of the Hong Kong Securities & Futures Commission, said he wants the new U.K. regulator to focus on where firms plan to make money in the future. The FCA will be “more intrusive,” and “on the front foot when we see things we don’t like,” he said.
Sants, who is joining Barclays Plc as its head of compliance and government and regulatory relations, initiated a system of more intrusive oversight, a break with the agency’s philosophy of “light-touch” regulation after it failed to detect or prevent the financial crisis.
The FCA is setting up a new policy, risk and research division to try to spot issues sooner and be its “alternative checkpoint on what’s happening in our industry,” Wheatley said.
The regulator’s new competition powers will allow it to require firms to submit information to price-comparison websites or change practices, or to divest parts of its operations. It can also refer matters to the Office of Fair Trading, a competition regulator.
While the FCA won’t be an enforcement-led regulator, the finance industry can expect a continuation of the FSA’s “credible deterrence strategy,” Wheatley said.
John Griffith-Jones, who will become the non-executive chairman of the FCA, said the regulator has a chance for “a fresh start.”
“Prevention in this industry is much cheaper than a cure,” he said.
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