/ Money

New financial watchdog – we don’t want a lapdog

It’s the New Year, and in the spirit of turning over a new leaf, the government is throwing out the old rule book to recast the way the banks are regulated. Great – but we want to make sure this watchdog works…

Avid readers of Which? Conversation will know we’re pretty excited about the Financial Services Bill. We gave evidence to the committee that was set up to examine the draft version.

The Bill represents a once-in-a-generation opportunity to change how banks and financial firms are kept in line, and we’re determined to make sure that consumer protection is at the heart of the new system.

We want a watchdog, not a lapdog

So today, we launch our ‘Watchdog not Lapdog’ campaign. We want to make sure that the new financial regulator is the watchdog that consumers can count on, not a lapdog that panders to the interests of the banks.

Across our work we have seen how the current financial regulator, the Financial Services Authority, has failed to protect consumers from dodgy financial products and services.

We’re pleased that the government wants to provide the new regulator, the Financial Conduct Authority (FCA), with the ability to remove dodgy products and ban misleading adverts. We hope that these powers, plus increased openness about its activities (such as which firms it’s investigating) should go some way to ensure that consumer protection is at its heart.

What will make the new watchdog a success?

To be the watchdog consumers need, the FCA must be:

  • An open regulator that tells consumers what it does: We want the FCA to tell consumers when firms are found to have broken the rules, what it’s investigating and what it’s going to do to stop it.
  • A strong regulator that stands up to the banks and promotes competition: We want the FCA to issue fines that are big enough to act as deterrents and promote competition by making sure products are transparent, simple to compare and easy to switch between.
  • A proactive regulator that acts on issues before they become problems: We want the FCA to take a more proactive approach and ban dodgy financial products and misleading adverts before they cause problems. Lessons must be learnt from the payment protection insurance mis-selling scandal.

So if you agree that it’s about time we got a financial watchdog strong enough to stand up to the banks, support the campaign by telling the government you want a watchdog, not a lapdog – and share your thoughts in the comments below.

We’re also looking for a suitable dog to front our campaign. If you think you’ve a pooch perfect for the job, find out how you can nominate your dog to be the face of our campaign.

[UPDATE] – On Wednesday 22 February 17.30-19.30 Which? is hosting an event with the new head of the FCA, Martin Wheatley. This event, held in central London, will be a chance for people to share their experiences of the banks, insurance providers and other financial services that they use on a day to day basis, and tell Martin why he needs to make sure the FCA is the watchdog consumers want.

Now the Financial Services Bill is going through Parliament it’s more important than ever that Martin hears about your experiences. Its clear that Which? Conversation commenters have a lot of experience of the kind of things we want the FCA to stamp out, so if you want to attend the event please get in touch at: which.campaigns@which.co.uk or tell us about your experiences below.

Comments
Guest
Roger Griffiths says:
19 January 2012

I am about to switch from RBS (soon to be santander owned) to an UK based bank that do NOT have shareholders!!

Guest

So Roger, what is the name of your new Bank and why did you choose it?

Guest

I am probably much too cynical, but even if we were to get the sort of watchdog we seek I think we should insist on some controls. For example, over time our consumer-foccused watchdog may become distracted by the lobbyists that try to influence him or her, the finance companies may give perks that later cause influence. Look at how our politicians were influenced by the Murdoch organisation.

I propose the watchdog should have an odd number of board members who can instruct the watchdog on actions. The majority of board members should be from the consumer side of the equation, the minority can be from finance companies and/or banks. One of the consumer side people could be a senior Which employee, others can be chosen from consumer focussed organisations. We also need to be able to read the complete minutes of the board meetings to ensure that the consumer is properly represented.

Guest
Tony from Barnet says:
20 January 2012

To regulate the banks, or any other business, it is essential that there is a SINGLE regulator who is strong and fearless. The recent debacle was largely caused by having a trio of weak regulators (FSA, Treasury and Bank of Enland) who blamed each other for the chaos this produced. Also the retail side of banking must be ring-fenced with the ‘casino’ side beng allowed to fail.

I agree with Topher that the board should have an odd number of members – and three would be too many.

Guest
David Jobson says:
19 January 2012

I don’t want a watchdog. I want a guard dog that barks early and loudly and then bites if the offender persists. In particular the self serving circle of moving funds without value added and then rewarding the initiators needs external controls to have internally decided salaries and bonuses regulated. Competition is barely separable from collusion in banking practice. It seems banks can fail and be bailed out, but bankers somehow do not. TRY: Bank A lends to Bank B (bonus earned); Band B lends to Bank C (bonus earned); Bank C lends to Bank D (bonus earned); Bank D lends to Bank A (bonus earned): Have you spotted the flaw? Those bonuses are more a parasitic fiscal drag on circulation than any economic value added. TRY:Bank A lends to hedge fund (bonus earned); Hedge fund buys Bank B (bonus earned); Bank B lends to Bank A (bonus earned): Have you spotted the flaw? A simplistic picture but tell me if this is not correct in concept?

Guest
Josh says:
31 January 2012

And the government get’s their tick along the way and you get nice roads, accessible schools and law enforcement. Win Win. But seriously, bonuses should be the least of our worries, it’s the leverage of those transactions and the false economy that is propped up by it that is the real concern. Dig deeper!

Guest

Yes we need a watchdog that bites. Regulators in both the USA and Britain have failed us and would at best be mewling kittens. The billions should not have been paid out to the gambling and negligent banks. Instead, the government should have made loans to businesses and mortgages for home owners from a newly formed state lending organisation (maybe under the auspices of the Bank of England); while guaranteeing account-holders funds up to the level they have already done. The existing arrangements are like replacing fire engines with petrol tankers.

Guest
Pat Soutter says:
20 January 2012

It is dangerously simplistic to blame the Banks for the current crisis and to assume that a “better regulator” will prevent a recurrence. The effects of IAS 39 introduced in 2001 have been ignored completely in the popular media but the results of implementation were disastrous. It reversed sound banking practices that had been in place for 100’s of years. It was implemented by a regulator with an international reach and widely approved by politicians. The concerns voiced by the banking industry and the world of business were ignored. Now, after the horse has well and truly bolted, this regulation is being amended.

The central problem with regulators is that they often lack practical, hands-on experience of the industry they regulate; they do not have to take responsibility for the results of their decisions; and they are quickly overtaken by hubris. I do not think that a barking or bighting dog will prevent a similar problem in the future. Dogs that bight usually get put down.

What is required is a wise Owl with excellent hearing and a long memory.

Guest
Pat Soutter says:
20 January 2012

I should have made clear that I am not a banker, nor do I work in the field of finance.