Other Citywire websites
Stay connected:

View the article online at http://citywire.co.uk/new-model-adviser/article/a634723

Labour: Regulators must focus on simplicity

by Michelle Abrego on Nov 15, 2012 at 13:31

Labour: Regulators must focus on simplicity

Regulators need to stop focusing on product transparency and instead work to make the financial services industry less complex, according to the opposition spokesman for the Treasury.

John Eatwell said the banking crisis and mis-selling scandals were not down to opaque products but the fact consumers did not understand what they were buying.

‘Complexity is the enemy of stability, it is complexity that is the enemy of future financial stability and the regulatory system is getting more and more complex,’ he said.

He said that not only have rules been made more complicated but the documents outlining them had grown larger as regulators tried to cope with understanding the cause of market failures.

6 comments so far. Why not have your say?

lee rawding

Nov 15, 2012 at 14:43

Rather a chicken and egg conundrum.

The regulator barely understands the things they have ring fenced in an arena they fondly imagine they can control.

Meanwhile, outside the ring fence life moves on at a rapid pace and that's where the innovators, entrepreneurs and sadly, the crooks too, operate.

I still maintain it's a hopeless task for any regulator to take on the quasi-management role that politicos seem to expect them to nowadays. Real cultural change cannnot be imposed from without the organisation and that goes for business and regulator alike IMHO.

No system is perfect but a lighter touch in some areas combined with stiff penalties for miscreants, including jail time for the responsible senior management might be an approach worth taking in future.

report this

David McCabe 1

Nov 15, 2012 at 15:00

This? From Labour? They created a ridiculous system in the fist place & did nothing to simplify things at all, just sat back & watched the bureaucracy go mad.....now consumers are being blamed for not understanding what they are buying. Absolutely priceless, I think he needs to get his head out of his derrier & look at the chaos his cohorts in the last Government brought on.

report this

Julian Stevens

Nov 15, 2012 at 15:10

The regulator is largely stuck with what's imposed on it by the government so, in part, simplicity of regulation cannot be achieved unless the government simplifies the tax structure governing investment products, notably pensions and bonds. That having said, there's also plenty the regulator could do withut reference to government. Only the other day I was trying to compare two personal pension contracts with a view to establishing the viability of transferring one into the other. Insurer A's illustration was based on assumed future growth rates of 5/7/9% p.a. whilst that of insurer B was based on rates of 4/6/8%. Great fun.

report this

Jonathan Kirby

Nov 15, 2012 at 15:15

@Julian

Actually things are slightly better now. Remember when Lautro projection rates were all the same and actual charges didn't come into the equation?

report this

Charles Rickards

Nov 15, 2012 at 15:16

Simplicity makes it too easy to point the finger of blame. This is why everything is dealt with by way of a committee, consultation, inquiry or whatever other means, that allows individuals to escape personal responsibility. Of course the media plays it's part, resulting in scape goats being sacked or forced to resign.

The sentiment however is spot on. Simple easy to follow rules that have clear consequences for non compliance. Consequences need to be a big enough deterent to be effective.

I also agree that transparency is a red herring. The consumer has been scared off by tales of horror laid out by the media in a commercially biased manner and the regulator has been too busy trying to protect it's own position and public image, to really deal with the issues effectively.

I for one will continue to deal with my clients in plain English and look after their interests to the best of my ability, which fundermentally should be all a regulator requires of me.

report this

James Clancy

Nov 15, 2012 at 16:52

This is a bit rich coming from the architects of the current regulators. May be he should ask Mr Brown why he created this complexity in the first place.

report this

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

Read more...

L&G chief Wilson scoops £4m pay package

by Rosie Sells on Apr 16, 2014 at 14:22

Sorry, this link is not
quite ready yet