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Regulator Ultra Vires? July 9, 2014

Posted by Audit Monkey in The State of the British Nation.
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An article in today’s ‘Times’ caught my attention on the journey to work this morning. Basically the Financial Conduct Authority (FCA) has issued an interim report into failings in the savings market. The FCA is considering intervening to improve interest rates paid to consumers with older accounts.

Part of the issue is that the retail banks offer high interest rates initially which decline over time. In short, it’s a bit of a teaser to attract new business. However, as customers tend to leave their savings with one provider after the introductory rate has expired, the FCA has commented that market is ‘not working well’.

The interesting part was this. While the Regulator has not indicated how the market could be improved, Mick McAteer, a FCA Non Executive Board Director, suggested via Twitter that consumer groups should campaign for Belgium style rule which limits the maximum number of savings accounts banks have to six.

First, why is a FCA Board Director using Twitter to relay his thoughts on a regulatory matter when surely any personal opinions of the FCA Board are supposed to remain private? This amounts to campaigning for reform outside of the day job. Please correct me if I’m mistaken. However, what gets me is the suggestion to limit the number of saving accounts bank offer. If customers leave their monies in poor performing bank accounts, then that’s their hard cheddar.

More importantly, surely the Regulator’s role isn’t to stifle competition in the banking industry. If Bank ABC wishes to offer a variety of bank accounts with differing rates over time, then surely that’s the Bank’s prerogative. That’s a commercial decision made by the Bank’s Executive Team. I suppose you could argue that offering retail swap options to unsophisticated customers was a ‘commercial decision’ but my wider point is the Regulator is simply acting beyond it’s powers and remit. If customers aren’t savvy enough to switch accounts or shop around, I can’t see why the Regulator should do their thinking for them.


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