Adair Turner, the chairman of the FSA, has suggested a “radical rethink” of regulation which could include the introduction of price caps and bans on some retail financial products.
Speaking to the Financial Times (FT), Turner says: “The way we do things now is not good. We may have to put what is expected into rules to make it easier for us to say what is not [acceptable].”
The discussion paper on product intervention asks whether parliament should grant new powers to the forthcoming Consumer Protection and Markets Authority (CPMA), which is set to take over retail regulation from the FSA in 2012.
In the foreword, Turner says the paper proposes a “new and more intrusive approach to the regulation of retail financial services,” and is designed to stimulate debate about how the FSA and the CPMA should pursue its objective of consumer protection. (article continues below)
He argues that severe consumer detriment has not been averted by focusing on fair and transparent sales processes.
Instead the regulator will look to focus on earlier intervention, including the banning of specific products being sold to certain customer segments.
The CPMA could have the power to set maximum prices on specific services, ban or necessitate certain elements of complex products or force even more products to carry risk warnings.
Speaking to the FT, Turner adds: “This is a radical shift. We have made part of the shift already… but now we are asking how radical we should be.