Structural weakness in the UK financial regulator is undermining savers' confidence, the Consumers' Association (CA) has warned.
It is demanding that a Treasury review of the Financial Services Authority and the Financial Services and Markets Act 2000, set for November, now considers alternative regulatory methods.
A ruling last week by Ann Abraham, the Parliamentary Ombudsman, that the FSA made no mistakes in its regulation of Equitable Life, was condemned by the consumer body for throwing policyholders "out to sea".
"The regulator's structures are just not fit for their purpose," said Mick McAteer, the CA's senior policy adviser. "The ombudsman's decision showed just how vulnerable consumers are."
The CA's concerns centre on the regulator's constitution as drawn up in the FSMA. Its four statutory objectives are to maintain confidence in the markets, to protect consumers, to educate the public about the financial system, and to curb financial crime.
In the case of Equitable during the period of Ms Abraham's inquiry (January 1999 to December 2000), the regulator sustained confidence in the markets and stopped the society collapsing, so fulfilling one of its four goals. But, in doing so, those who continued to buy Equitable's policies without knowing the full story lost out. The CA insists the FSA chose to save the insurer at the expense of consumers.
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