TCF – principles-based regulation in practice

Principles-based regulation is at the core of the Financial Services Authority’s strategy and while there is much discussion about its meaning, it has been difficult to see how it works in practice until recently. In this extract from a recent presentation Sarah Wilson, insurance sector leader at the FSA, explains the challenges of the FSA’s treating customers fairly initiative and how it embraces the principles-based concept.

The FSA’s Treating Customers Fairly initiative is one of the over-arching strategic projects within our regulatory agenda for retail markets. Furthermore, it is one of the earliest aspects of FSA work to have adopted a principles-based approach. It was not the only early adopter – for example, we have long had a principles based approach to our supervisory work on corporate governance; we adopted a principles based approach to the introduction of individual capital standards for insurers in 2005; and we have in the recent past worked with the industry to find solutions to market failures without introducing new rules in the areas of soft commissions and unbundling of costs in trade execution and contract certainty in the general insurance market.