Fishburn Hedges

17.06.2010

Financial regulators need to communicate with their end users

“Macro-prudential regulation”. It is a long and important phrase and is at the centre of the shake-up announced by George Osborne, which sees the Bank of England regain its place as top dog in the City regulatory pile after a dozen years of the Financial Service Authority’s predominance.

The move was cheered by bankers at the Mansion House, not least because the popular FSA chief executive, Hector Sants, has been persuaded to take a lead role in the new structure.

But what does it mean to the man in the white van with the England flags? Sure he wants the banks kept under control, but he still wants them to provide a mortgage on his semi in Romford, and a small business loan to expand his roofing operation. He won’t be happy when measures to stop the financial system overheating mean his bank tells him to “do one”.

The simple fact is that 95% of people – at a conservative estimate – have no idea what all these changes mean, yet will be impacted by them. To get the wider public to trust financial institutions then there is a need for them to trust the regulatory system or you will end up with another Northern Rock. The FSA, alas, never really was able to explain the work it did effectively to the general public, which was a major contributor to its demise.

A final thought. When the FSA was formed, the deputy governor of the Bank of England, Howard Davies, became the first chief of the new regulator. Now it is being abolished the final chief of the FSA is becoming deputy governor of the Bank of England.

Explain that to white van man.