FCA’s Woolard: Armchair regulation is easier than the real thing

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Oct 17, 2019

I’m a big fan of rugby, so I’ve spent the past few weekend mornings gently shouting encouragement at my TV.

Now, in that moment I’m Eddie Jones. And then it ends. And I realise I am sitting comfortably on the sofa, with a cup of coffee and bacon sandwich, and it is slightly longer ago than I’d like to recall since I last pulled on my boots. The moment comes and I am forced to admit armchair sport is a little easier than the real thing.

I was struck with this same thought while reading Gregg McClymont’s recent Money Marketing piece The Disaster of contingent charging should not have surprised the FCA.

Neither I nor the FCA are immune from criticism. We get things wrong. All organisations do.

Everyone at the FCA accepts the need to move faster to limit consumer harm. But moving fast cannot come at the expense of evidence-based regulation or the legal requirement on us to consult, and for that consultation to be meaningful. Consultation and deciding only when we have evidence help mitigate against the risk of poor policy making and, frankly, we should all be afraid of anyone with enforcement powers acting first and looking for the evidence later.

For us to step in and ban a practice, as we have proposed with contingent charging, is a significant intervention in a market – it is not a step we can take lightly and we need a strong evidence base to ensure we don’t see unintended consequences, particularly for those with little ready cash but an urgent need for advice. Even other commentary in Money Marketing suggests that there is a difference of opinion on this question.

Gregg ended his piece by saying the FCA should “embrace” behavioural economics. I’m not quite sure how we could embrace it more, aside from me hugging each member of the team of behavioural economists employed by the FCA. To reassure the team, I’m not planning to do this.

We were the first financial regulator in the world to have a behavioural economics unit and part of the reason so many people now know disclosure is not – at least by itself – the answer, is because of the research we commissioned, we designed and we have made freely available to all. I’m proud of the fact that behavioural economics is central to the FCA improving the remedies we propose and is making us better at our job.

It was striking that Gregg felt the cause of our alleged neglect of behavioural economics was our competition objective.

It is important to remember that our objective is competition in the interests of consumers. It is not competition for its own sake. That we have used our competition focus to deliver better outcomes for consumers should be seen in our general insurance market study. Or asset management, when we got to the heart of governance and decision making on fund boards. Our competition objective allows us to better understand how a market works, rather than focusing on firms in isolation. That frees us to look at new, much wider remedies where we find issues.

So, criticise us, by all means, particularly when we deserve it. But please judge us on the facts of what we have done, and remember that, like sport, perhaps armchair regulation is somewhat easier than the real thing.

Christopher Woolard is an executive FCA board member and director of strategy and competition

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