What next for financial services regulation? Here's the feedback to the Treasury’s plans
City minister Mark Hoban was a prominent figure at the Conservative party conference, popping up at a series of fringe meetings to explain the government’s plan to reform financial regulation.
And he had a consistent message – that the new Consumer Protection and Markets Authority (CPMA) would be a “consumer champion”. It was a message tailored to appeal to party activists. But, judging by the responses to the consultation on the government’s regulation plans, the idea has gone down less well with insurance community.
Both brokers and insurers are worried that putting the interests of the consumer at the heart of the new regulatory regime will result in a regime insufficiently tilted towards the interests of business.
Biba, in its response to the consultation, which closed on 18 October, said: “We believe there is an obvious and irreconcilable tension in CPMA being "on the side" of the consumer while simultaneously policing good behaviour within markets.
Biba’s concerns reflect the association’s broader agenda that the regulatory burden on brokers should mirror the impact of their activities.
Such concerns are not exclusive to brokers.
The International Underwriting Association of London told the Treasury that it is important to make a distinction between the needs of businesses and those of ordinary consumers. It said: “It is essential that it (the CPMA) make distinctions between the need to protect retail customers and the need to protect businesses.
“It is well established that business-to-business transactions are not subject to the same asymmetry of knowledge and power as consumer transactions. That must be reflected in regulations and the practice of the regulators. “
The new regulator should avoid favouring the protection of consumers and business customers in ways that are “unjustly prejudicial to the insurers and reinsurers”.
“As ever, proportionality will be key,” said the IUA, which is worried about the impact that a consumer bias could have on London’s ability to compete with other, less constrained insurance markets.
Biba added that there are additional broader public interest considerations for the CPMA, arguing that the new watchdog must ensure that the level of regulation it imposes is appropriate for the firm in question.
And it said, proportionality will be an important issue for the Prudential Regulation Authority too.
“The PRA needs to differentiate between the types of firms it regulates so as not to damage the effectiveness of insurers in delivering their products to both consumers and insurance intermediaries.
Otherwise, it warned, insurers would be encouraged firms to register elsewhere in Europe where burdens are less onerous. This is surely not an outcome that Hoban, wearing his hat as City champion, would be keen to see.
