Delivering sustainable regulation despite 'punctuated equilibrium'
FCA CEO designate Martin Wheatley speaks at Cass
Darwin described evolution as 'a punctuated equilibrium' - periods of rapid change following periods of large degrees of dormancy.
According to Martin Wheatley, CEO designate of the Financial Conduct Authority (FCA), financial regulation is similar: "We have long periods of relatively little change but then occasional periods where there is a catalyst…that means there's lots of change"
Wheatley, a Cass MBA alumnus, gave the analogy as part of The Currie Lecture 2012 at Cass Business School. The lecture honours former Cass Dean David Currie, Baron Currie of Marylebone.
In 2004 and 2005 the demand was for 'light touch' regulation. Countries were competing to show they provided friendly environments in which to do business. A lower degree of regulatory intrusion was seen as a good way to let business flourish. It was assumed that "market forces would be the factors that would make good outcomes".
Following the financial crisis "we are now at that point of the cycle when we're introducing a lot of change."
At the end of March the Financial Services Authority will be disbanded. Instead, the FCA, with Wheatley at the helm, and the Prudential Regulation Authority at the Bank of England, will be launched.
The FCA's remit is to focus on conduct within the financial services industry. The body will look at industry ethics and behaviour.
According to Wheatley this will be a different sort of regime. The agency will be close to the City and financial services firms but "not captured by them". It will look forward to what is evolving in the financial markets rather than regulating "through the rear view mirror which is typically how much regulation has operated in the past".
He aims for "regulation that understands consumer behaviour and how you encourage good competition in markets which deliver good outcomes for consumers not just a compliance with a rule book."
Wheatley said that the FCA will move away from short term thinking and look at how consumer trust can be restored. He aims for the agency to deliver regulation that will prove sustainable during the highs and the lows: "the moderated markets and the difficult markets".