The Financial Conduct Authority (FCA) was born in the aftermath of a crisis, so that is all it knows, but it has laid the groundwork for making markets work well again, its chairman John-Griffith Jones is expected to say in a speech on Thursday.
The financial services industry must now demonstrate it can conduct itself properly and operate once again under its "own steam", Jones will say in an address to the CASS Business School in London.
"The FCA is a child of crisis," he will say in the speech entitled Regulation in a Recovery. "I have argued this evening that we know how to make the new regime work well from a conduct perspective. But we are the means to the end, not the end in itself."
Though the regulator has a different "mindset" than was evident in the past, the need for effective conduct regulation remains essential because "some things have not changed", said Jones.
The need for consumer protection has if anything increased rather than diminished, particularly with the proposed changes to the pensions regime
"Egregious behaviour remains egregious. Our market integrity objective is not negotiable. The need for consumer protection has if anything increased rather than diminished, particularly with the proposed changes to the pensions regime.
"The inevitable complexity of some long-term financial decisions, the asymmetry of knowledge between producer and consumer, and the unfortunate history of products coming to market designed to benefit the industry rather than the public, demonstrate beyond all reasonable doubt the continuing need for an effective conduct regulator."
Jones will say the regulator has a rulebook "that looks a bit like layers of sedimentary rock" and represents "extremely hard work" to re-write, but that, with improving conduct, fewer new rules should be added to it. Its 11 principles, meanwhile, are "here to stay".
The FCA's goal is to be a preventative regulator, Jones will state, and there have been examples where this has demonstrably been the case, such as with its interventions on interest-only mortgages and interest rate hedging products.
Jones will conclude: "We regulators have a big job ahead of us, but modest as compared to the changes required of some of the firms we regulate. Their future behaviour will shape the future of regulation, and over time they will get, from Parliament, the regime they merit."
