November 05, 2008

Banks could soon find their retail operations coming under tighter scrutiny from the City watchdog under proposals that would severely curtail the industry’s freedom to regulate it. The Financial Services Authority on Tuesday proposed that it should extend its remit to oversee areas of banking conduct including current accounts, personal loans and overdrafts, savings, card services and cash machines. Currently those areas are covered by sections of the Banking Code, which is enforced by an industry-led body, the Banking Code Standards Board, into which the regulator has some input.

The proposals come as the FSA prepares to take on responsibility for banking and building society payment transactions under the European Payment Services Directive, which comes into force next November.” Retail banking is going through a period of rapid change and regulation needs to keep pace with this change,” said Jon Pain, managing director of retail markets at the FSA. “We believe that in order to ensure that the regulatory model is fit to meet these challenges, now and in the future, the FSA should regulate the wider aspects of everyday banking for all consumers.”