Banking StandardsWritten evidence from the Financial Services Authority


This memorandum is prepared in response to the request directed to Martin Wheatley from the Parliamentary Commission on Banking Standards (“the Commission”) during the oral evidence taken on 27 February 2013 from Lord Turner and Martin Wheatley. This request was for a note outlining our initial thoughts on how the FCA will take forward its role relating to consumer access to financial products and services.

The Financial Service Act 2012 gives the FCA an objective to promote effective competition in the interests of consumers. As part of this objective, the FCA “may have regard” to a number of factors when considering the effectiveness of competition, including “the ease with which consumers who may wish to use those services, including consumers in areas affected by social or economic deprivation, can access them”. This “consumer access consideration” is not an objective or a duty on its own, but something that we may have regard to as we take forward our competition objective. Our approach to consumer access issues will be shaped by this underlying legal framework—the focus of our role will be on how we can enhance ease of access through measures to promote effective competition.

It is the FCA’s view that substantial policy interventions that have a sole focus on enhancing access, and which require significant economic and social policy trade-offs to be made, remain the role of the Government rather than the FCA. This includes actions that would require firms to offer products or services where it would not be their commercial choice to do so. We consider that Parliament reflected this intention in the debate on the consumer access consideration1 and by not making enhancing access a specific FCA objective of its own, but a consideration of our competition objective. The focus of our actions will be on making markets work efficiently, but not directing firms to participate in the market.

“Financial exclusion” (not being able to access financial products and services) can create real disadvantages for those consumers affected. Not being able to access contents insurance, for example, could mean that consumers face total losses if they are burgled. Not having access to a bank account can mean missing out on discounts for making payments by direct debits. Not having access to lending reduces consumers’ ability to smooth expenditure over time. Depending on the precise circumstances, this can also prevent individuals from accessing funding for business opportunities. There are multiple aspects to the financial exclusion problem, such as a lack of products in the market that consumers can afford or are eligible for, a lack of products that are suitable, or where products are too complex or not explained in a way that the average consumer can comprehend.

Actions that the FCA will take to promote competition have the potential to increase consumers’ access to products and services. For example, where we are able to reduce regulatory barriers for firms entering a market, this may facilitate the emergence of firms who are willing to provide services to particular consumer groups. Where competition is increased between firms in a market, there may be greater incentives for firms to design innovative products that are tailored to the needs of specific consumers. Prices might also be driven down by competition, which would also increase the affordability of products for consumers.

The FCA will also continue to consider the impact that our interventions might have on the ability of consumers to access services. Our duty to act in a way which promotes competition strengthens the requirements upon us to do this. Where possible interventions might unnecessarily restrict access, we will weigh up the pros and cons and also consider alternative approaches. In doing this, the quality of the products that consumers might access will be important to us though—in some cases the risks to consumers from accessing “toxic” products will far outweigh any benefits and we will intervene to prevent consumers suffering detriment.

We look forward to working with Government, and other agencies with an interest in reducing financial exclusion, as we take forward the consumer access consideration. In order to give full effect to our enhanced role, we will be seeking to increase our capability and knowledge base in respect of consumer access issues. This includes engagement with consumer organisations and other experts on financial exclusion and increased use of data relating to access. We are still at an early stage in deciding how we will take forward the consumer access consideration and are actively engaging with relevant stakeholders to understand the key issues in this area. Following this engagement, we would expect to publish a wider statement on our policy on access later this year.

We hope that this paper provides the information sought by the Commission, with the appropriate level of detail. Do let us know if the Commission has any further questions or requires any further information.

14 March 2013

1 House of Lords debate on Financial Services Bill, 12 November 2012, Hansard Columns 1320-1324.

Prepared 19th June 2013