New watchdog aims to prevent finance companies making 'excessive' profits
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Your support makes all the difference.The incoming financial services regulator will punish insurers and banks that make "excessive" profits, according to a report due out this week detailing its powers and structure.
The Financial Conduct Authority (FCA), one of the two watchdogs that will replace the Financial Services Authority next year, will have a powerful role ensuring that there is suitable competition in these markets.
The report is expected to show that the FCA will "follow the money", an industry source said.
Martin Wheatley, who will head the FCA, said in a speech to the Association of British Insurers conference last month that ensuring firms are not making excessive profits would be one of the organisation's four key competition roles.The others are making sure that firms develop new products, that they strive to offer better services than their rivals, and that the most successful banks or insurers are those that respond best to consumer demands.
It is not clear how Mr Wheatley will judge what level of profit is excessive, but he is determined to crack down on the sort of practices that resulted in the payment protection insurance mis-selling scandal.
The source added: "The FCA's role will be to make sure competition works well for markets and consumers. It will be more interested in pricing and profitability than market share.
"It will pay increasing attention to those products generating the highest returns."
The report will be expected to clarify how the competition role will work against the revamped anti-monopolies regulator.
The Competition Commission and the Office of Fair Trading are being merged to become the Competition and Markets Authority in April 2014.
However, the FCA will have the power to fine companies that are making too much profit. It is also expected to be able to ban the products if they are deemed to hurt financially the person on the street.
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