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New regulator won't repeat FSA's failings, says Wheatley
The man taking charge of the regulatory body that is replacing the Financial Services Authority has pledged a clampdown on bad financial products under his watch.
Martin Wheatley, incoming chief executive of the new Financial Conduct Authority (FCA), which will be launched next year, said the approach would mark a departure from the FSA, which he said had placed 'too much trust' in firms to disclose information to customers at the point of sale.
'We didn't look enough at how products were designed, how decisions were made or how staff were incentivised,' he said.
'With product intervention, let me be clear that this power will "do what it says on the tin" – it will allow the FCA to intervene where we feel products have been inappropriately sold or are simply bad products.'
He said the new regulator's approach would involve intervention to stop problems at an earlier stage than under the current regime.
'We will be more prepared to use formal tools including enforcement actions to support the FCA's emphasis on intervening earlier to stop problems from occurring,' he said. 'We will take action to tackle root causes – like poor remuneration arrangements – rather than waiting for the risks to crystallise.'
Under a new regulatory framework brought in by the coalition government, the FCA will report to a new Financial Policy Committee at the Bank of England. The new set-up is known as 'twin peaks' as the roles of consumer protection and financial stability are being split into different organisations, with the former becoming the responsibility of the FCA and the latter passed to a new body called the Prudential Regulatory Authority, which will be a subsidiary of the Bank of England.
The shake-up follows intense criticism of the FSA and its failure to avoid the financial crisis and many other scandals of the past decade.
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