The new regulator that will be replacing the Financial Services Authority (FSA) early next year will have the power to instantly ban unsuitable financial products that it considers a risk to consumers.
In a guidance document published yesterday, it was also revealed that the Financial Conduct Authority (FCA) will be able to impose tougher penalties for financial misconduct, pursue criminal prosecutions and make supervisory judgements about a firm's business model and forward-looking strategy.
The abolition of the FSA will see three new regulatory authorities created:
The Prudential Regulation Authority (PRA) will supervise the safety and soundness of financial firms, the FCA will be focused on protecting consumers and the Financial Regulation Authority will have overall responsibility for financial regulation, overseeing both the PRA and FCA.
"The FCA offers a huge opportunity for the regulator and firms to start afresh, and work in partnership to reset how we deal with conduct in financial services," said FSA managing director, Martin Wheatley.
The guidance was welcomed by the Council of Mortgage Lenders, the Building Societies Association, the Investment Management Association and the Association of British Insurers.
Consumer Focus warned, however, that "the test of the FCA will be whether it prevents toxic products such as PPI, mortgage endowments or split capital trusts in the future".
"Will it intervene early or will pressure from industry delay action? A model where customers are ripped off, and then awarded compensation years afterwards, is expensive and wasteful and serves consumers badly."
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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