Speaking at the Building Societies Association (BSA) annual lecture, entitled ‘Principles in practice: an antidote to regulatory prescription’, Andrew Hilton, director at the CSFI, argued that regulation had stifled the financial sector and had limited the possibilities of innovation. He explained: “Putting every new retail product through endless regulatory hoops means at least a few good ideas will be strangled at birth.
“Regulation can hurt the consumer almost as much as it can protect. It cuts the returns that one can expect on products bought from regulated entities. The less obvious one is that it undermines the principle of caveat emptor; to paraphrase Professor Gower, it encourages the negligent to exploit protections that were aimed at the vulnerable. And it makes an already litigious industry even more so.”
He added that the adjectives used in the 11 principles used in the Financial Services Authority’s (FSA) guidelines were hard to define. He said: “What is ‘due’? What is ‘reasonable’? What is ‘adequate’? ‘Proper’? ‘Clear’? ‘Fair’? ‘Open’? ‘Co-operative’? There isn’t a consensual definition for any one of these, and lawyers would have a field day if we tried to define them.”
A Mortgage Introducer source, who wished to remain anonymous, said: “The FSA is definitely stifling innovation. I thought it was supposed to offer protection, but it has done the opposite. Costs have gone up and a lot of documents that it releases are ignored.”
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