AIFA believes consultation needed on regulation cost

The paper provides further details on the new Consumer protection and Markets Authority (CPMA).

AIFA welcomes the consultation but believes that the cost of it needs to be considered.

Andrew Strange, director of policy at AIFA, said: "We agree with the need for reform of the regulatory architecture, and will continue to engage with the Treasury on the proposals.

“The clarity over the spilt of responsibilities, timetable and interim arrangements provides clear direction for our profession and focus for our activity.

"The ‘twin peaks' approach addresses aspects of previous regulatory failure, but other failures of regulation are in danger of not being addressed by the current proposals.

“Consumer protection and market stability are crucial roles for regulation, but the CPMA must also focus on overseeing social policy issues, such as the savings, pension and protection gaps. Additional statutory objectives in this area would benefit consumers.

"We have supported Mark Hoban's recent comments on consumer responsibility, but are concerned that the term consumer champion for the CPMA detracts from this important objective.

“We must be clear about the responsibility of all market participants in financial transactions.

"Having secured a National Audit Office (NAO) review of the Financial Services Authority last year, AIFA supports the greater transparency and accountability of permanent NAO and Public Accounts Committee involvement as a first-step in the necessary checks and balances on the regulator.

“We also support the new statutory footing of the Small Business Practitioner Panel, although question whether the panels deserve stronger powers.

“However, further consideration must be given to the costs of any changes. Firms already face a barrage of costs due to regulatory changes in 2012. A further £50 million of indicative costs needs to be fully considered and weighted appropriately.

"The proposed changes to the Financial Services Compensation Scheme are an interesting development given the current review of the funding model of the scheme.

“There are also three separate European directives or papers that impact on this area. While SMEs paying for bank defaults is entirely inappropriate, cross subsidisation of providers in cases of product failings remains crucial in providing a safety net for consumers."