Two regulatory bodies could lead to turf wars
Many insurers face increased costs as a result of having to report to two regulators instead of one, following the government’s decision to scrap the FSA, experts have warned.
Chancellor of the Exchequer George Osborne announced last week that the FSA will be abolished and its regulatory responsibilities transferred to three new bodies – the Prudential Regulation (PRA) Authority, the Consumer Protection and Markets Authority (CPMA), and an economic crimes unit for white-collar fraud.
He said the government would publish details in a consultation paper before Parliament breaks for its summer recess in July.
Osborne said that the abolition of the FSA is designed to create a more joined-up approach to financial regulation. But Viscount Trenchard, a member of the committee that scrutinised the legislation to establish the FSA, told the House of Lords: “I worry about the cost of these new bodies to the financial services industry.”
Richard Hobbs, director of public affairs consultancy Lansons, said that all but the smallest insurers would be regulated by the new CPMA and PRA. He said: “The situation is very unclear but the cost of regulation will go up. It’s a very expensive solution for something that didn’t go wrong.”
Financial services partner at solicitor Beachcroft, Matthew Rutter, said the mooted fragmentation of the FSA created the scope for turf wars between the new bodies as well as added costs.
ABI director-general Kerrie Kelly said: “It is very important these proposals do not add further costs that will fall to consumers."
But technical and compliance manager at Biba, Steve White, said brokers would only have to report to the CPMA. And ex-Lib Dem Treasury spokesman Lord Newby, who expressed concerns before the election about the shake-up, said that FSA chief executive Hector Sants would provide continuity during the transition.