Financial services firms have learned nothing about treating customers fairly in the last eight years, according to the man who regulates the industry – Hector Sants, chief executive of the City watchdog, the Financial Services Authority.
Speaking yesterday at a conference to launch the new Financial Conduct Authority – which will partially take over the FSA's duties in 2013 – Mr Sants repeated criticisms by the regulator's first chairman Howard Davies in 2003: "The biggest disappointment of my time at the FSA has been the failure of firms, in particular their senior management, to learn the lessons of past mis-selling".
Mr Sants, who is set to become a deputy governor of the Bank of England and chief executive of the new Prudential Regulatory Authority in 2013, said he felt the same disappointment. "These words are as true now as they were then," he said. "Eight years on, there is little or no evidence that any significant change has occurred in the attitude of the financial services industry towards its customers."
He conceded that there is greater awareness of the importance of the issue, but added: "The evidence suggests that we have yet to see real improvements on the ground from the customer perspective. For example, complaints in 2010 were 3.5 million compared to 2.7 million in 2006. Furthermore, the whole PPI saga, which is likely to lead to redress of £9bn, visibly demonstrates the need for change."
He said part of the problem had been the FSA's remit. "It is not the regulator's role to determine its own mandate. That is for society as a whole to agree. An independent regulator's job is then to select the best tools to use," Mr Sants said.
"But unless the outcomes those tools are designed to achieve are aligned with society's expectations, the regulator will not have the necessary mandate to operate, nor will it be a sustainable institution. This was undoubtedly a problem for the FSA."
Mr Sants said he will begin to take "an increasing back seat role" at the regulator as it changes.
The chief executive of the new FCA will be Martin Wheatley, the former chief of the Hong Kong securities regulator, who joins the City watchdog in September. He will work with Margaret Cole, currently head of the FSA's conduct business unit, to plan the the operating model of the new body.
Ms Cole called for debate about the structure of the FCA, to avoid repeating mistakes made when setting up the FSA. "The failures of the past 10 years mean that change is essential," she said. "We have a once-in-a-generation opportunity to shape the new regulatory structure and challenge past orthodoxies. We must not waste it.
"For the FCA to be a credible and effective regulator, it must have the support and backing of Parliament and the public from the outset. What it can be expected to do and achieve and what is outside its remit, undesirable or impossible to achieve, should be clearly understood," Ms Cole said.