Dan Waters, director of retail policy at the FSA, spoke about principles-based regulation at the ABI conference yesterday.
Waters told delegates: “Implementation is about much more than simply making rules.”
He characterised the move towards more principles-based regulation (MBPR) as “a shift of emphasis by the FSA away from looking at the processes carried out by firms, towards the outcomes we seek to achieve, for consumers, firms and markets.”
Waters raised three key points:
• Principles-based regulation is not new, so should not be perceived as unfamiliar.
• It's not just about new rules — it's part of a broader process with Treating Customers Fairly at the heart of it.
• The FSA is quite comfortable with firms taking an innovative approach towards reaching the required outcomes.
He added: “We want to discourage any kind of purely box ticking approach to regulation.”
Waters also discussed the role of the Financial Ombudsman Service (FOS). He reassured delegates that “very few [FOS] decisions turn on the interpretation of FSA detailed rules.”
He added: “Where an individual FOS decision may have broader application to other cases, we have established the "wider implications" process to co-ordinate the work of the FOS and the FSA. Should ambiguity or uncertainty arise in respect of significant FOS decisions as a result of our move to more principles based regulation, we would be prepared to place increased reliance upon this process going forward.”
In regard to the Insurance Conduct of Business (ICOB) review, Waters said: “We expect to go out to consultation on this in the middle of next year.”
