To no one’s surprise, City watchdogs have shelved a statutory ‘duty of care’ that would oblige authorised financial services firms to act in the best interests of consumers and pay compensation following breaches. A discussion paper published last year by the Financial Conduct Authority floated the idea in the wake of scandals including the mis-selling of PPI and benchmark-rigging.
Among the reasons given by the FCA for parking the notion is the ‘stress of litigation’ for consumers. How very considerate of the authority to be so mindful of their wellbeing that it has obviated the possibility of any such litigation arising.
But perhaps my cynicism is misplaced. The watchdog will consider introducing rules to allow consumers to take private legal action against firms which breach its principles. We will hear more in another discussion paper this autumn.
FCA fudge on a ‘duty of care’ partially obscured the rest of a notable speech by chief executive Andrew Bailey on the future of financial regulation. Law firms with booming practices in this area will note with interest his assertion that, post-Brexit, the contrasting traditions of English common law and European civil law will enable our regulatory framework to evolve in a different way.
‘The common law approach strengthens the need for outcomes-based equivalence rather than a rules-based approach – in other words, the outputs of regulation not the inputs,’ said Bailey.
Financial services firms based here are expected to access the EU market under the equivalence regime. For Bailey, that would mean ‘continuing to look to improve onshored EU legislation on a “same outcome, lower burden” basis’. There would also need to be a dispute resolution mechanism for dealing with disagreements or the withdrawal of equivalence on either side.
Bailey wisely signalled that this does not herald a return to the discredited ‘light-touch’ philosophy of the pre-lapsarian years before the 2008 crash. Yet – for me at least – it still grates when City regulation is described as a ‘burden’ by the Square Mile’s most senior policeman. We could have done with a bit more heft back then, not less.