Biba blog: refashioning the FSA requires more than a lick of paint

A new year, a fresh start. With that in mind, I had the decorators in at home during the second week of January to freshen up the walls and ceilings downstairs.

What I thought would be a fairly minor exercise turned into a major move-around of furniture to avoid paint spillages etc.

As the chaos unfurled around me, I took solace in work issues and some comfort in realising that my domestic “crisis” somewhat resembled the regulatory changes afoot at Canary Wharf.

For insurance brokers, the FSA regime has become disproportionate, inappropriate and overly costly”

Biba has engaged enthusiastically in the lengthy process to re-point the regulatory structure. The FSA was “built” in 1997 by the then incoming Labour government. It was designed to regulate the institutions – its rules, structure, style and processes were created accordingly.

Insurance intermediaries were not on the radar at this time and, as a result, when we were brought onto the FSA scope in 2005, we were simply fed into its existing mechanisms.

The results were well articulated in the independent research commissioned by Biba and published in March last year. For insurance brokers, the FSA regime has become disproportionate, inappropriate and overly costly. Biba has replayed this message many times to the Treasury and the FSA itself.

We are comforted by recent comments by Mark Hoban MP, financial secretary to the Treasury, in which he acknowledged that the insurance broking sector is low-risk and that “risk-based regulation and supervision” is how he wants the new Financial Conduct Authority (FCA) to proceed.

We have made the point that insurance brokers make a direct and indirect contribution to UK GDP of around 1% – the same as the UK’s agriculture sector. At 1% of GDP, we should be entitled to a more tailored approach by the regulator than has been the case.

Encouraging

It is encouraging that this seems to have been taken onboard by both the politicians and the regulator.

Biba is engaged in talks with the FSA about its plans for supervising insurance brokers, both large and small, under the FCA. While the FCA’s supervisory resources will be no greater than the FSA’s, it is planning to use its supervisory budget “more prudently”.

In the meantime, however, it is business as usual at the FSA, as evidenced by the recent £2.17m fine against Direct Line and Churchill and by the commencement of its regulatory review programme, focusing on governance, culture and controls within smaller firms.

Now the decorators have gone and the furniture is back where it was, life at home has returned to normal. At Canary Wharf, however, the changes need to be more than just cosmetic. One could say it’s a job for the builders, as well as the decorators.

Steve White is head of compliance and training at Biba