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the financial regulation confidence game August 6, 2010

Posted by Bradley in : financial regulation , trackback

From the UK Treasury’s consultation document on financial regulation:

Prudential and conduct of business regulation require different approaches and cultures, and combining them in the same organisation is difficult. As a result of the combined remit of the FSA, participants in financial services and markets, particularly ordinary consumers of retail products, did not always get the degree of regulatory focus or the protection they may have expected or required.
The Government will therefore create a dedicated consumer protection and markets authority (CPMA) with a primary statutory responsibility to promote confidence in financial services and markets. This objective will have two important components. First, the protection of consumers through a strong consumer division within the CPMA. And second, through promoting confidence in the integrity and efficiency of the UK’s financial markets.

Whether or not the FSA was paying insufficient attention to the interests of consumers is debateable – its TCF initiative took a broader approach to the protection of consumer interests than many regulators have. But this idea that promoting confidence in financial markets and protecting consumers are the same thing seems to me to be deeply problematic. And promoting market integrity and promoting confidence in the integrity of markets may be completely separate enterprises.

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