FSA successor could cap borrowing according to incomes

The new regulatory body which will take over from the FSA will be more open and accountable, the Treasury has said.

In the spirit of transparency, the Financial Conduct Authority will be able to publish warning notices against firms before any formal action is taken.

It will also have new powers to ban products immediately and make firms immediately withdraw misleading promotions.

Also under consideration is whether loan-to-value should remain uncapped but that there should be caps set by loan-to-income.

In its new consultation paper on the FCA, ‘A new approach to financial regulation – building a stronger system’, the Treasury says: “The transparency principle recognises the importance not only of ensuring that appropriate information is provided in respect of regulatory decisions, but also that the regulator is more open and accessible both to regulated community and general public.”

The consultation paper, however, makes clear that there will also be more of the same.

FSA staff will transfer to the FCA to continue regulating financial service firms and impose sanctions.

One of the first to react to the new consultation was Andrew Strange, director of policy at the Association of Independent Financial Advisers.

He said: “We are concerned about some of the proposed new powers, particularly publishing the names of firms under preliminary investigation.

“This is a worrying shift towards guilty until proved innocent.”

The Investment Management Association’s chief executive, Richard Saunders, said: “We shall consider with interest the provisions on product bans and the withdrawal of financial promotions, given the £420m of compensation required from investment intermediaries in the last two years. In that regard, we will be looking carefully at the future of the compensation scheme.

“Recent events have highlighted significant structural problems with the existing rules. The statutory framework must allow for a compensation structure that is fair and fit for purpose.”

The consultation runs until April 14.