Biba blog: Managing those ups and downs

I’ve become used to more than my fair share of ups and downs in recent months what with being an avid Arsenal fan. My footballing dreams had been in freefall of late and like the economy were showing little sign of recovery. One good win at the weekend though and my hopes have been revived – if only it were that easy to solve the nation’s financial woes. Sadly, we’re still on the downslide as far as the economy is concerned with the situation likely to get worse before it starts getting better. What we really need is some positive news.

Taxpayers have seen a massive increase in state involvement in our banks, but precious little of the expected social return on their investment. There are a lot of customers out there with severely dented expectations who are wondering whether the bail out of the banks was really worth it. Mortgage approvals are still falling, getting credit has not got any easier, some banks have chosen not to pass on interest rate cuts to their borrowers but cut them for their savers and mortgage arrears are climbing. One brief ray of light has been the Royal Bank of Scotland’s announcement that it will not move to repossess the properties of customers falling behind with their mortgage payments for at least six months; but cynically you cannot help but think that the political pressure brought to bear on that particular bank must have been severe to achieve that outcome.

Those of you who know me will not be surprised when this blog turns to regulation. There too the perception of what has been achieved since the FSA started regulating intermediaries in 2005 is mixed. Expectations have been raised and dashed. Are we any closer to principles based regulation with industry guidance and market led solutions to problems? Well, no not really.

One plus point is that BIBA is hopefully very close to finalising a market solution on disclosure and transparency in the commercial market which will include FSA approved guidance, but at times the speed of this process has been torturous.

The cost and burden of regulation does not seem to have got any lighter, however, or cheaper for that matter. Take for instance the Financial Services Compensation Scheme – general insurance intermediaries are facing the prospect of having to pay out to compensate the customers of failed banks. How is that fair? All firms are likely to have to pay an increased levy this year. But is the regulation that we are getting for this extra money actually any better or is the world any safer for the consumer?

It will be interesting to see what the Financial Services Practitioner Panel’s 2008 survey of approximately 10,000 regulated firms comes back with. The independent survey is conducted every two years and aims to gather industry views on the FSA and create a track record of the regulator's effectiveness and performance over time. It is due to be published soon and its findings will no doubt mirror my concerns. Whatever emerges from the survey will be used to focus the panel’s future discussions with the regulator. Let’s hope that the message emerging from the survey will be that the future of regulation is not so much principles, but more appropriate and better applied rules.