By Charlie Conchie
Granting the UK’s top financial watchdog responsibility for ‘financial inclusion’ would be “overreach” and give it powers that it cannot discharge, legal experts have warned today.
The Financial Conduct Authority yesterday pushed back at suggestions that financial inclusion should be included within its mandate following calls from the Treasury Select Committee in a report in June.
In a response to the report published yesterday, chief of the FCA Nikhil Rathi said inclusion of the clause within its mandate “might risk increasing expectations that the FCA should step in to fix problems that it does not have the power to solve”, which he said could add to confusion rather than address the root causes of exclusion.
“The FCA does not not have any levers to make firms offer services to consumers (the decisions to set public service obligations appropriately sit with Parliament and Government—as is the case on forthcoming access to cash legislation), or to change underlying factors which might mean that consumers are considered higher risk by firms,” Rathi said.
Legal experts backed the comments from the FCA today and said it was right to resist the calls to absorb a responsibility for financial inclusion.
“First, it’s overreach – the FCA has no statutory powers that correspond to financial inclusion. Next, to the extent that the FCA can do anything about it, it’s largely implied through the FCA’s existing consumer protection objective,” Simon Morris, a financial services Partner with law firm CMS said.
“Last, it simply can’t – financial inclusion is a complex process in the hands of half-a-dozen state agencies, and it’s no good giving the FCA a responsibility it simply can’t discharge.”
The FCA’s existing consumer protection objective states that the watchdog will set rules for firms to make sure they “treat their customers fairly, deliver appropriate products and services and put customer protection above their own profits or income”.
A financial services lawyer at Gowling WLG similarly said that expressly including financial inclusion in the FCA’s remit was not necessary
“The FCA already considers consumer outcomes – namely access, fair value, suitability and treatment, and confidence,” said Kam Dhillon, principal associate and financial services lawyer at Gowling WLG.
“Furthermore, these outcomes go to the heart of financial inclusion. It is unrealistic to expect the FCA to address (and fix) the root causes of exclusion.”
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