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Bank customers could be given the protection of the main City watchdog in a move that would sweep away decades of voluntary regulation covering savings and current accounts. The Financial Services Authority said yesterday it was considering major reforms to the banking code and statutory rules for the industry.
In a consultation paper, the regulator said it wanted to oversee all bank services, including the relationship with retail customers, as part of a wider risk-based approach. The move was widely seen as a reaction to the financial crisis, which Adair Turner, the FSA chairman, has partly blamed on banks' excessive risk-taking.
Talks with the Banking Code Standards Board, which monitors the voluntary banking codes, have been under way for months. The board released a revised set of codes this year which it said would give consumers greater protection from banks that did not treat them fairly.
The British Bankers' Association, which has also been involved in talks, is understood to favour the current system but yesterday refused to condemn the plan. It said officials would study the proposals and respond in due course. Bankers will be put on the spot by the Treasury select committee on November 18, when MPs grill the bosses of nationalised banks Bradford & Bingley and Northern Rock.
Under the FSA's plan, a revised set of codes would form the basis of a Banking Conduct of Business sourcebook to be monitored by the regulator. It would, the FSA said, extend its regulation "across all aspects of banks' relationships with their retail customers". Credit, such as unsecured loans and credit cards, would stay under the Office of Fair Trading's remit.
City analysts said that the FSA had concluded the enforcement powers of its board were inadequate and that it was no longer prepared to leave the conduct of deposit-taking business largely to self-regulation.
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