City tells new watchdog to back off as red tape is hurting competition

Tim Wallace
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FINANCE firms are closing down operations and stopping serving some customers in response to actions taken by the new City watchdog, a study shows today, raising fears that competition is being harmed.

The Financial Conduct Authority (FCA) exists to improve outcomes for customers and aid competition. But the FCA’s practitioner panel found some of its changes could be having the opposite effect.

The panel found 20 per cent of firms are withdrawing from certain customer groups, 20 per cent are pulling out of some market sectors and 32 per cent fear they are now at a disadvantage compared with competitors overseas.

As many of the worried firms are at the smaller end of the market it is thought they are effected by changes such as the retail distribution review (RDR) which stops financial advisers taking commission.

As advisers now rely more heavily on fees, that has cut the number of firms operating and the type of customer who will be willing to use the services.

The FCA is thought to be planning more thorough cost-benefit analyses to make sure these costs are noticed

However it is unable to stop many of the damaging changes because they are based on EU rules which they can only partially influence.

“We have changed our approach and the way we regulate, and we are becoming a more forward-looking, predictable and engaged regulator which acts from a position of greater understanding of the industry,” said FCA head Martin Wheatley.

“We are also developing our approach to our competition objective.”