The FSA's replacement may go so far as intervene on insurance pricing. But who will monitor that?

It has been clear for some time that the FSA wants to distance itself from the ‘principles-based regulation’ it once championed. New phrases have appeared, such as ‘outcomes-focused’ and ‘judgment-based’. Exactly what this means is unclear.

Proof that this marks a fundamental change of direction came last month in the FSA’s feedback statement on product intervention and new powers in the Financial Services Bill. Together, these will mean that its replacement, the Financial Conduct Authority (FCA), will be a lot more involved in the day-to-day running of all regulated businesses than the FSA was.

Keen to avoid a repeat of issues like PPI, the FCA will be able to impose its judgments about policy terms, how products are sold and to whom. It may even intervene in pricing.

The FSA itself admits that this approach will bring it into conflict with firms from time to time. Which raises the question: who will regulate the regulator?

Lord Hunt is a partner and chairman of the financial services division at national law firm Beachcroft.