The FSA’s handbook currently runs to 8-9,000 pages and the regulator has indicated its wish to move away from the prescribed rules the industry currently uses to a more principles-based, outcome-focused regime. The FSA says firms will still have to reach the same standards of regulatory compliance but believes a more principles-based approach will provide firms with an increased number of options on how to reach those outcomes.
AMI members were asked their opinion on principles-based regulation in the July Mortgage Intermediary Census. 39 per cent of respondents thought it would improve things for all firms, 6 per cent thought it would improve things for small firms only, 14 per cent thought it would improve things for larger firms only, and 41 per cent thought it would not improve things for any firms.
22 per cent of AMI members believe this regulatory shift will give them more flexibility to decide how to meet the FSA’s standards but 57 per cent believe it will bring greater uncertainty over what is and what isn’t compliant. 28 per cent of respondents feel it will be harder to defend complaints while 19 per cent believe the move will mean a greater need for the FSA to police the market.
Rob Griffiths, associate-director of AMI, commented: “The move to a more principles-based regulatory regime will have a major impact on the financial services industry. The full impact of that change has yet to be determined and it’s clear from the results of our survey that there is a level of uncertainty from mortgage intermediaries around principles-based regulation and the challenges and benefits it may bring. For instance, many seem to be adopting a ‘wait and see’ attitude. Our census reveals that 44 per cent of respondents have yet to decide if they are in favour of the move or not.
“AMI recently held a principles-based regulation workshop to consider the issues such a move might bring, not just for the regulator, authorised firms and consumers, but also for trade bodies. It has already been suggested that a move to more principles-based regulation could leave a gap between the FSA’s high-level principles and any detailed rules required, for instance, by European Directives. We must be clear on what fills such a gap – be that industry codes of practice, trade body guidance, etc. It would not be helpful for firms to see one set of FSA prescribed rules replaced with numerous, perhaps conflicting, industry codes.
“The results of the survey show that many intermediaries are yet to be convinced of the benefits of a move to more principles-based regulation. There are still questions to be answered around any potential impact or benefits for firms. AMI will be using the workshop and census results to feed into guidance for members on what the move might mean for them and for us as their trade body.”
