Rarely out of the headlines, the financial services sector has had its fair share of difficulties of late. 

Irrespective of fines and changes in regulation, the stories of mis-selling and misbehavior abound.  The Financial Services Authority (FSA), which was introduced in 1997, was the brainchild of the then Chancellor of the Exchequer Gordon Brown and officially ceased to be on 1st April 2013.

Following an announcement by George Osborne on 16th June 2010, the death knell was sounded for the Financial Services Authority and the plan to redistribute its responsibilities to a number of new regulatory agencies and the Bank of England was outlined.  These developments put the Bank of England back at the helm of the financial services ship and it is hoped that the new agencies created will learn from the mistakes of the Financial Services Authority, preventing future scandals such as Barings plc, the Northern Rock and of course the whole pensions mis-selling fiasco.

The new structure involves a new agency called The Prudential Regulation Authority (PRA), which will be part of the Bank of England and will be responsible for making sure financial services firms are “stable”.  Thereafter The Financial Conduct Authority (FCA) will take over as the industry watchdog.  When it comes to who’s in charge of what, the Bank of England will again be at the top of the tree and will have control over the two new regulators.  The PRA, which will regulate 1,700 firms is headed up by Andrew Bailey who is the deputy governor of the Bank of England.  The FCA on the other hand, is under the leadership of Martin Wheatley, an ex-FSA team member who is best known of late for his investigation into the Libor rate-rigging scandal that hit the headlines last year.

With a widely reported seven in ten fines for fraud being levied to financial services companies, it is hoped that this new structure will get to the root of the problems that seem to be holding the industry back and often penalising consumers.  Like all industries, there are good and bad players in the financial services industry and the ideal is that the good are allowed to develop their businesses with the consumer firmly in their focus, while that the bad are stopped in their tracks.  The ideal scenario of course is that the consumer has access to affordable and efficient products that satisfy their needs, delivered by caring and knowledgeable professionals.  But can this ever be?

From the consumer’s point of view, only time will tell whether or not this restructuring will protect them from the mis-doings of unscrupulous financial services representatives.  From the industry’s point of view, there’s no getting away from the fact that the new regulation will call for new systems, new approaches and this means a whole host of additional costs and of course, ultimately, the consumer is the one who’s likely to pay.

So who will really win the financial services race at the end of the day?  That’s a good question.