Proposals still unclear over who would regulate insurance industry
The Conservatives will uphold their pledge of dismantling the FSA if they win this year’s general election, according to the shadow treasury minister Mark Hoban.
Speaking at Lloyd’s of London, Hoban said a new Conservative government would implement the plans outlined in the party’s white paper ‘From Crisis to Confidence: Plan for Sound Banking’. “If we win,” he said, “clearly the first priority in terms of the financial sector is implementing the proposals in the white paper.”
Under these proposed reforms, the Bank of England will assume regulatory control from the FSA for the “macro prudential” sector. Meanwhile, a new body, the Consumer Protection Agency (CPA), would have responsibility for supervising IFAs and other financial intermediaries.
“This means banks, building societies and other financial institutions such as insurance companies would have their prudential position monitored by the Bank and not the successor to the FSA,” he said.
Hoban explained that these reforms would address the “structural weaknesses” present in the FSA’s regulatory regime.
The Bank of England would monitor the solvency of insurers while recognising that the “risk posed by insurers and banks were different”, he added.
But Hoban said that details about the proposed regulation of insurance brokers under a Conservative government had yet to be concluded and would be subject to further consultation. “We haven’t finalised the dividing line at the moment between what is in the CPA remit and what is in the banking remit,” he said. “My guess would be that, given insurance brokers are intermediaries and have a lower balance sheet risk, they will be regulated by the CPA.”
Hoban also criticised the government’s Financial Services Bill, which is currently with the House of Lords for consideration, as failing to address some of the “fundamental weaknesses in structure” that characterised the financial services sector during the banking crisis. He said the bill’s proposed reforms concentrated on “cures and not preventative measures”.