Financial Services Bill, Second Reading, House of Commons
7 February 2012
Briefing on the Financial Services Bill second reading, House of Commons ( 42kb)
The Financial Services Bill will reform the current regulatory system for banking and financial services industries. It will give the Bank of England macro-prudential responsibility for oversight of the financial system and through a new, operationally independent subsidiary, for day-to-day prudential supervision of financial services firms managing significant balance-sheet risk. The Financial Services Authority will be abolished. A new conduct business regulator, the Financial Conduct Authority (FCA), will protect consumers, promote competition and ensure integrity in markets. Citizens Advice is primarily concerned with the parts of the Bill relating to conduct regulation and the FCA.
- An effective conduct regulator is vital to ensure that consumers can have confidence in a financial services market, which works in their interests. The strategic objective of the FCA should focus on ensuring that markets are fair, transparent, efficient and work well for consumers.
- We welcome the FCA’s objective to promote competition in the interest of consumers, but it must also have powers to deal with situations where competition fails the interests of some consumers
- We welcome the proposals in the Bill to give the FCA additional tools to deal with business conduct causing or likely to cause consumer detriment and support the measures on product intervention, greater regulatory transparency, misleading financial promotions and the requirement to satisfy the regulator that a business model is suitable.
- We welcome the super-complaint power. This will allow Citizens Advice and other consumer bodies to use their evidence of wide spread consumer detriment to make complaints on behalf of all consumers – including those who may not be able to complain or understand that their rights have been infringed. To make this power effective, the Bill should require the FCA to respond quickly and effectively to super complaints concerning widespread consumer detriment.
- The Bill sets a framework for moving regulation of consumer credit lending to the FCA. This is welcome and we call on the Government to make an early announcement on this issue
- However it is vital that not only lenders but also debt collectors, brokers, debt managers and retail lenders which sell insurance products are regulated by a single strong regulator. We believe responsibility for the regulation of all of these should go to the FCA. The Government must ensure that any credit or ancillary business such as debt management services, which does not pass to the FCA is covered by an equivalent protection.
- We warmly welcome Section 3R of the Bill which imposes a duty on the FCA and the consumer financial education body to ensure "debt services" are available to members of the public.