Examination of Witnesses (800-805)|
WEDNESDAY 25 JUNE 2003
MS A FOSTER
D WATTS FINANCIAL
(Ms Foster) My view is that it is absolutely critical
that the FSA retains its independence. That is its strength. Nonetheless,
I do think the process of reporting to the Treasury Select Committee
is a very valuable tool. I went as a member of the public to the
Treasury Select Committee hearings following Equitable Life and
the questioning was very testing, very challenging. I am pleased
to say that all of the public space was absolutely packed. That
to me was a very good accountability mechanism. I think that is
indeed an extremely effective way. Of course the Treasury themselves
will be doing the two-year review of the Financial Services and
Markets Act. Both of these are quite powerful ways of ensuring
accountability to Parliament. I cannot at the moment think of
anything which would be more effective.
801. If we focus on accountability, you can
take it more or less at three levels. There is a low level of
transparency where a regulator volunteers material, but that is
the extent of it. There is answerability in terms of being required
to respond to questions put to them and at the highest level challenge,
in other words where there is a body which can overturn any decision
of the regulator. You have been covering answerability in respect
of Parliament, where you are suggesting changes are not necessary.
From a consumer perspective, are any changes necessary either
in respect of the transparency aspect or the appeal mechanism?
(Ms Foster) From the transparency aspect, we are always
pushing for greater transparency, because that is what consumer
bodies do. Certainly we made quite a representation to the FSA
about identifying the consumer implications of their proposals.
Sometimes it is jolly difficult to find them in these several-hundred-page
documents. The FSA has responded and now, on the front of all
their consultation documents, they will highlight the areas of
specific relevance to consumers. So that has got better. From
the Consumer Panel point of view, we do find them a very open
organisation and we have not had requests for information or requests
to see people refused. Greater transparency may possibly require
legislative changes to enable the FSA to be more transparent prior
to the full outcome of an enforcement procedure.
802. In an ideal world, if you were given carte
blanche to produce legislation it would be to provide legislative
authority effectively for the FSA to be able to put more material
in the public domain.
(Ms Foster) Yes. Clearly there are very, very important
issues of market confidence, but notwithstanding those, we would
like as much as possible to be put in the public domain. I have
already given you examples where it is very difficult to know
where to draw the dividing line. In terms of the suggestion of
an appeals procedure for the Financial Ombudsman Service, I have
to say that is not something we would favour. What we appreciate
with the Financial Ombudsman Service is the fact that it is accessible
to ordinary consumers and they get by and large, provided it is
a straightforward case, a pretty speedy response. It would not
be in the interests of ordinary consumers to have an appeal procedure,
in fact it would really adversely affect them in terms of the
cost and the complexity. There is the opportunity of a judicial
review, there is indeed the opportunity for the Financial Ombudsman
Service to agree with a firm for a test case to go to court if
the issues are so complex. We think these are sufficient and would
not welcome the addition of another level such as an appeal mechanism
of FOS decisions.
(Mr Watts) On the area of accountability Parliament
has a crucial role in defining the scope of the FSA and what is
regulated by it and what is not. We have made representations
on quite a lot of things in that area and at the moment, for example,
we feel very strongly, that home reversion schemes, which are
how elderly people can release capital from their home and will
currently not be regulated by the FSA, should be brought into
the scope. Before that we thought the mortgage advice should be
regulated and now it will be. That is a crucial area for parliamentary
803. Shall we be seeing your views on that in
the public press?
(Ms Foster) On home reversion schemes?
804. On the non-regulation of the release of
capital from elderly people's houses? How would you bring pressure
on the FSA to bring this into regulation if it is regulatable
(Ms Foster) It is actually a matter for the Treasury
and indeed we have said to the Treasury that they should include
home reversion schemes.
805. I absolutely understand all that, but I
still do not understand the levers you pull to put pressure on
the FSA. I do not say this in any pejorative sense, but at the
moment you seem to me like something inside the great empire of
the FSA, recruited in order to balance the fact that it is entirely
a bureaucracy. You are injected, as it were, with a bias in favour
of the consumer, to advise it as its advisers. The only way to
change that impression is if I were to see you taking up the cudgels
furiously in a disagreement with the FSA where you think they
are wrong. I asked therefore: shall we be reading about this in
the papers and, if not, how else are you going to bring pressure
(Ms Foster) You very possibly will be reading about
it in the papers because the Treasury did announce that they are
going to publish a consultation on bringing home reversion schemes
into the FSA scope. We shall certainly respond to that and we
shall make sure you get a copy.
Lord Elton: Thank you very much. You will also
no doubt take some credit for the Treasury announcement.
Chairman: Thank you both very much indeed for
the paper and the annual report and for being with us this afternoon.
That has been extremely helpful in explaining your role in the
process but also putting your views forward in terms of the process
itself. Thank you very much indeed.