Introduction

1. The Building Societies Association (BSA) represents mutual lenders and deposit takers in the UK including all 47 UK building societies. Mutual lenders and deposit takers have total assets of over £375 billion and, together with their subsidiaries, hold residential mortgages of £245 billion, 20% of the total outstanding in the UK. They hold more than £250 billion of retail deposits, accounting for 22% of all such deposits in the UK. Mutual deposit takers account for 31% of cash ISA balances. They employ approximately 50,000 full and part-time staff and operate through approximately 2,000 branches.

2. The BSA is pleased to provide comments on the consultation by the Financial Services Authority on the FCA approach document (the consultation). The BSA has responded to a range of previous consultations on the regulatory reform exercise, all of which are public and can be located on the BSA website. We are also in the process of responding to a series of consultations dealing with detailed areas such as approved persons, authorisation and supervision, and draft secondary legislation.

3. The FSA seeks views on all the content of the consultation, but asks some specific questions (on page 60) about competition and gathering/receiving information. The response below follows the chapter sequence in the consultation and picks up on the specific questions in context.

Executive Summary

4. The BSA supports and welcomes most of the key proposals, including -

• the move towards more interventionist, pre-emptive regulation, provided it is handled proportionately and non-retrospectively, and is well targeted and effectively delivered
• plans for forward-looking supervision based on the existing ‘life-cycle’ approach to the fair treatment of customers, which remains entirely valid and is well understood by BSA members
• the acknowledgement that the FCA and the PRA will take their co-ordination responsibilities very seriously – this is important recognition of a risk in a ‘twin peaks’ system of firms being pulled in different directions by conflicting regulatory requirements
• the confirmation that the FCA will regulate in a transparent fashion – this is particularly important in relation to section 166 skilled persons’ reports, IT expenditure etc
• the proposed ‘balanced’ approach to consumer responsibilities
• proposals for a Policy, Risk and Research Division at the FCA – good intelligence is an integral component of successful regulation (and effective delivery the other)
• the sensible, pragmatic proposals regarding authorisations and reporting.

5. However, care is required on certain matters; for example -

• the Association urges caution in the use of the new pre-emptive powers, especially pre-publication of warning notices, in order to avert a presumption of guilty until proven innocent
• careful consideration should also be given to the needs of firms that, until now, had a nominated supervisor but which will not under the new arrangements
• we also believe that, while co-ordination with other relevant bodies is very important, the FCA should not allow its work to overlap with other bodies such as the competition authorities or the Money Advice Service - it is very important that the new regulator focuses on its statutory objectives
• the transfer of responsibility for the regulation of consumer credit from the OFT to the FCA requires great care – we provide more detailed commentary below, and
• finally, we note that a number of highly publicised comments about the nature and the strength of the new regulator appear to miss the point – for instance, in our view, the key question is not whether the new conduct regulator is seen as being ‘strong’ or ‘weak’, but about whether or not – in practice - it is effective.

Download the full response