* Watchdog looking to tear down barriers to innovation
* Wriggle room limited by tougher EU consumer safeguards
* Wheatley warns there won't be return to light touch
By Huw Jones
LONDON, May 29 Britain's markets regulator
pledged on Thursday to offer a more sympathetic ear to financial
firms wanting to develop new products that help customers save
for their old age.
Martin Wheatley, chief executive of the Financial Conduct
Authority (FCA), struck a more conciliatory note after lawyers
have criticised the year-old watchdog for being heavy handed and
effectively vetoing new products.
The FCA was launched in April 2013 to protect consumers
better after a string of mis-selling scandals ranging from loan
insurance to pensions spanning several decades.
Wheatley outlined plans to encourage more innovation in
financial products, especially around rapid advances in
technology such as using mobile phones for banking and
investments online like "peer to peer" lending.
He said a market that works well is one that allows for
much-needed innovation as the "middle ground" of consumers were
not being served well, partly because firms argue that a welter
of new rules make it harder to come up with new products.
The need for innovation is also being fuelled by the UK
government's decision to end compulsory annuities for people
with retirement pots after the FCA called the market disorderly.
The FCA's predecessor had told the industry to be "very
afraid" but Wheatley said this was at the height of the 2007-09
financial crisis when taxpayers had to rescue banks.
"The tone is different because I think we recognise that our
core objective of making markets work well is not just served by
locking down everything that could go wrong," Wheatley told a
Bloomberg News event.
Next month the FCA will begin a public consultation on how
limited or simplified automated advice could be given to
customers online without the financial firm having to comply
with the full panoply of regulatory safeguards.
The watchdog will look at ways to make disclosures to
customers more meaningful, Wheatley said as he criticised an
unnamed bank for having terms and conditions on its basic bank
account that are longer than Shakespeare's Macbeth.
The FCA will identify barriers to innovation and set up a
hub to give compliance advice for innovative products. There
will also be an "incubator" to support innovative businesses as
they seek authorisation from the watchdog.
Wheatley said London has the capacity to become a European
trendsetter in a booming tech scene and create an "innovation
heaven", though there won't be a return to the pre-crisis "light
"We want firms to have the freedom to break new ground, but
there is limited societal appetite to accept more scandals in
the industry," Wheatley added.
As economic recovery gets underway, there is also risk that
over-confidence sets in with lobbying to unpick reforms, which
would be dangerous, he said.
The FCA's wriggle room to encourage innovation and offer
"waivers" from some rules will be limited by the European Union,
whose financial watchdogs are already moving onto the retail
turf, encouraged by national supervisory failures in the past.
The European Securities and Markets Authority (ESMA), and EU
watchdog, will get powers to go over the heads of national
supervisors to ban a harmful products. Transparency and
disclosure requirements in markets covered by EU rules, such as
mutual funds, are also being toughened up.
"Clearly where there is very definitive rules in the
European framework, then they have to be complied with. Our
flexibility will be to look at principles and outcomes as much
as we can," Wheatley said.
(Reporting by Huw Jones; editing by Susan Thomas)