FSA and government at odds over FCA objectives

9 November 2011 | By Steve Tolley

Under proposals in the draft financial services bill, the FCA’s strategic objective will be to protect and enhance confidence in the UK financial system. The operational objectives are to provide an appropriate degree of protection to consumers, to protect and enhance the integrity of the financial system and to promote efficiency and choice in the market.

Last week, Adair Turner, chairman of the FSA, told the Treasury select committee (TSC) the strategic objective should be about efficiency, fairness and consumer protection, rather than confidence.

Last month, Sir John Vickers, chairman of the ICB, told MPs scrutinising the bill that the confidence objective is too focused on beliefs about the market rather than the way it functions.

In April, the TSC’s report into competition and choice in the banking sector called for the FCA to have competition as a primary objective. Last week, Christine Farnish, the chair of Consumer Focus, told the TSC the confidence objective could stop the regulator intervening in problems in case it undermines confidence.

Giving evidence to the TSC this week, Hoban rejected Consumer Focus’s claim. He says the work of the regulator must take into account its operational objectives, which makes building false confidence extremely difficult.

Hoban says: “You cannot prise apart the strategic and operational objectives. The strategic objective is the umbrella statement about the role of the FCA. It is the operational objectives which give the meat to the bones and set out what the FCA will be doing.”

Hoban told the committee he would take concerns about the draft bill’s objectives into consideration for the final bill, which will go before Parliament early next year.

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