Forum Brief: Financial services review

The Treasury has announced a review of its financial services strategy.

Ministers are to consider whether the government's three-year-old Financial Services and Markets Act is working in line with initial expectations.

Stephen O'Brien, shadow paymaster general, said: "We support the review of the Financial Services and Markets Act. Financial services are one of the most important sectors of the economy and it is vital that the legislative framework allows it to prosper.

"I do however have some concerns about the scope of the review. In calling for the Office of Fair Trading to assess the impact of FSMA on competition, today's statement seems to gloss over the vital role the government has to play in creating the right competitive framework. In particular the OFT must compare the competitive environment in the UK with that in other developed countries.

"I am pleased that the FSA is committed to cutting the volume of consultation which has been excessive. I support the revisions to the cost benefit analysis which is carried out before new rules are enacted.

"When the review looks at the boundary of regulation, we need to know whether the European Union is causing trouble for us here in the UK. Far too often, it seems, actions that would be in our national interest are prevented because of some real or perceived obstacle in Europe.

"There have been a number of difficulties relating to the boundary of regulation in the last year ranging from extended warranties to mortgage equity release, and these do need to be sorted out."

Forum Response: Association of British Insurers

Peter Vipond, head of financial regulation and taxation at the ABI, said: "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."

Forum Response: Consumers' Association

Mick McAteer, senior policy advisor at the Consumers' Association, said: "What a wasted opportunity. The review is very disappointing, with absolutely no recognition of the collapse in consumer confidence and the need for regulation to protect consumers. It shows little understanding of the need to review the nature and purpose of the regulation to fit the needs of consumers in the 21st Century.

"It has failed to recognise that the Financial Services and Markets Act needs to be reviewed to assess the impact on consumer confidence following Equitable Life.

"We are particularly concerned about the consultation over when the FSA should replace decisions in individual cases by the Ombudsman and over the possibility of appeals to the Ombudsman decisions which could effectively fetter the Ombudsman's independence and effectiveness.

"We welcome the commitment to look at cost-benefit analysis but there is no recognition of the need to reverse the way cost-benefit analysis is done so that the consumer is the focal point.

"We are also pleased to see that the review will be clarifying regulations for advice provided through areas such as the workplace and Citizens Advice Bureaux but it has failed to address how to fund and provide access to advice."