FSA Accused Of Over-Regulation

by Robin Pilgrim, LawAndTax-News.com, London

07 March 2005

In a report published last week, the Centre for Policy Studies (CPS) accused the UK's Financial Services Authority of over-regulating the country's financial services sector, to the detriment of the UK's competitiveness.

In an open letter to the FSA's chief executive John Tiner published to accompany the report, and entitled "The Leviathan is still at large", the CPS argued that:

"The FSA, which came into formal existence in 2002, is one of the most powerful, and one of the least accountable, institutions created in the UK since the war. Its lack of accountability is now nurturing a sense of disengagement and growing disillusionment within the financial services industry."

Other concerns expressed by the think tank were that the FSA is vulnerable to political direction and influence, and that it is becoming an increasingly defensive and risk-averse organisation.

In order to remedy these perceived weaknesses, the CPS recommended a move towards principle-based rather than rule-based regulation, less dependence on the Treasury, and a clearer differentiation between the retail and wholesale markets.

According to a Reuters report, however, the conclusions reached by the CPS were rejected by both the FSA and the government, with Financial Secretary to the Treasury, Stephen Timms observing that:

"The FSA does an extremely effective job balancing the interests of consumers and industry while maintaining high levels of investor confidence in markets."

Recommended