The U.K.'s Financial Conduct Authority is in favor of changing its conduct principles to accommodate campaigners demanding a tougher stance against financial firms abusing clients, but the details of the reform still need to be ironed out before any decision is made, according to Christopher Woolard, executive director for strategy and competition at the regulator.
Organizations regulated by the FCA must follow 11 principles, and one which sets out that "a firm must pay due regard to the interests of its customers and treat them fairly" has been criticized as weak by victims of historic financial abuse.
Woolard, speaking at an event organized in the House of Commons on Oct. 16 by the New City Agenda think tank, cautiously agreed.
"So far we have been clear that the current regime needs to change," said Woolard. "The question for us really that we must come back to is, does the duty of care, as expressed, provide us with an additional tool? If it does, I think we'd be keen to have that tool."
However, he qualified his opinion by emphasizing that the details of what a new principle might look like are far from agreed upon, and the debate is likely to continue for the foreseeable future.
"In trying to get there, we do need a deeper understanding of the issues. I think there is a lot of complexity ... We don't have all the answers."
Campaigners, many of whom are former business owners who lost their livelihoods at the hands of HBOS and RBS, whose restructuring units stripped their companies of assets in the wake of the financial crisis, have called on the FCA to impose a strict duty on finance firms to always decide in their customers' best interests, even when that decision would hurt the bottom line.
The FCA launched an official consultation on the matter in July. The deadline for submitting comments is Nov. 2.
No decision has been taken as yet, Woolard said, noting that it was ultimately the prerogative of elected politicians to pass a new law mandating the so-called duty of care.
On the same day as Woolard's appearance, the FCA announced it was expanding the powers of the Financial Ombudsman to take over complaints from small businesses against banks.
The ombudsman will now be able to handle grievances from companies with balance sheets up to £5 million, or turnover up to £6.5 million and fewer than 50 staff, an increase from 10 staff and turnover of €2 million, meaning that a large majority of the U.K.'s 5.7 million small and medium-sized companies will now be eligible.
The move was only "a small part of the jigsaw," said Woolard, pointing to a raft of other reforms that were brought in as the scale of bank abuses of small companies was revealed, and after the FCA conceded that U.K. law does not permit it to act against either Lloyd's, which took over HBOS, or RBS, for treating customers unfairly. Both banks are now running compensation schemes to the tune of hundreds of millions of pounds.
The government changed the insolvency rules to give distressed firms more protection from lenders in recent months, and in 2016 the Senior Managers Regime took effect, assigning responsibility to top executives for misconduct committed by their underlings.
Separately, campaigns are underway to set up a judicial inquiry into the conduct of banks and to form a Financial Services Tribunal which would allow complex commercial lending cases to be brought against banks without the need for the losing party to bear the trial cost of the winner.