U.K. Gov’t. Launches Review of FSA Law, ABI Approves

The U.K.’s Treasury Department will begin an investigation of the Financial Services and Markets Act, which created the Financial Services Authority as the sole regulatory and enforcement agency for financial services, including the insurance industry.

The FSA already regulates the life and pension industry, and will assume full control of general insurance regulation in early 2005. It has been criticized on several fronts. Consumer groups have faulted the FSA for acting too slowly in cases involving pension misselling and other abuses. The insurance industry has complained of the increased costs of regulation, and the adverse effects proposed new solvency rules could have on the industry’s ability to compete for capital.

John Tiner, who took over as head of the FSA last September, has promised that the agency will become more responsive to both consumer and industry concerns. He assured delegates attending the recent Chartered Insurance Institute Conference in London, that he was open to a dialogue with the industry. “We have established a set of principles, not rules,” said Tiner. He stressed that the industry has to change in response to public demands – “a challenge for its leaders-” and said his aim was to “redress the imbalance of power in the market” to make it more equal.

The Association of British Insurers (ABI) announced that it would give its support for the Treasury’s review. “Whilst the ABI recognises that it is not appropriate at present to undertake a review of the legislation, the Government plans to address many issues of concern to the Industry,” said the bulletin. “This may help to enhance the future competitiveness of the UK financial services sector. The key strands of the review are an assessment of the impact of FSMA on competition; aspects of the relationship between the FSA and the Financial Ombudsman Service; and the boundaries of FSA regulation.”

Peter Vipond, Head of Financial Regulation and Taxation at the ABI stated: “The review presents a timely opportunity to consider a whole range of issues that we have taken up previously with the Treasury. These include the complexity of the FSA Handbook of Rules, streamlining the consultation process and the need to ensure consumers become better-informed and properly advised. We particularly welcome the intention to put in place robust and transparent processes for ensuring Ombudsman decisions take into account the wider implications for firms of those decisions”.

Topics Legislation Uk