A toothless watchdog that didn’t even bark?

John Griffin

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Now that the Financial Services Authority (FSA) is no more, it is likely that it will mainly be remembered for one thing: presiding over the near-meltdown of the UK’s banking system.  It didn’t rein in the banks, and arguably even encouraged the explosion in the City in the mid 2000s, with its feather-light touch approach to regulation.  To be fair, though, none of the so-called regulators around the world came out of the crisis (if, indeed, we are out of it) smelling of roses.

So what will the UK’s financial landscape look like post-FSA?  Well, where once we had a single City regulator to fail to notice a looming financial crisis, we’ll now have two.  But I’m being unfair; things really will change.  For a start, the blue and white FSA logo will be replaced by a maroon and white logo of the Financial Conduct Authority (FCA).  And last week George Osborne, and his well-maintained scissors, cut the ribbon to officially open the Prudential Regulatory Authority (PRA).  Briefly, the PRA is a subsidiary of the Bank of England and is designed to ensure the banks have enough capital and liquidity (which should prove challenging, as rumour has it we’re already £25bn light); the FCA is there to protect consumers.

But let’s be optimistic.  The PRA seems determined to adopt a more intrusive approach to regulation for the financial institutions it is overseeing; and the FCA seems determined to make the consumer’s interests central when dealing with financial regulation, and will issue fines where appropriate and police the markets vigorously.

We can only hope the new regime’s watchdogs are more Hound of the Baskervilles and less Scooby Doo.