David probes the heads of Which? and Consumer Focus in their appearance before the Treasury Committee.

Witnesses: Peter Vicary-Smith, Chief Executive, Which?, and Christine Farnish, Chair, Consumer Focus, gave evidence.

ne Q172 Christine Farnish, may I ask you about the business and market analysis team that will be the engine room, if you will, of the FCA? Are you attracted by that new concept and are you satisfied that the FSA officials, who are very likely to be passported over, have the right expertise to fulfil the objective of this new team?

Christine Farnish: To your first question, the answer is, yes, I am very attracted by the prospect of a horizontal team that can analyse the way in which a particular horizontal market works, because I think we have seen, particularly with mass-market retail products and some of the problems over the past 10, 15 years, that the problems are market-wide and it is not a question of one individual provider or firm doing something that is not right. It is a question of the whole market behaving in a particular way and selling products in a particular way that is causing detriment. So I think analysis of what is going on in the market, having your finger on the pulse in terms of up-to-date market intelligence of what is being sold by whom to whom on what terms and where the money is being made would be a huge step forward for the financial services regulator, and, indeed, it is done in many other regulatory regimes.

On the second question, I think this is aspirational for the FSA. They recognise that this is an important new step for them. I don't believe they have the necessary quality and quantity of skills they will need to do that, but these people exist in other regulatory regimes, and I think it could be very helpful to second some of the people who are used to working in this way to the new FCA to get things going.

Q173 Could you give us an indication of which regulatory regimes you think these people might be drawn from?

Christine Farnish: All the economic regulators have people who think about the way markets work in economic terms. So that would be an obvious starting point.

Q174 The existing UK regulators? Could I ask a question of Mr Vicary-Smith? You expressed concern in your written submission to us that the PRA veto could lead to a concept of too big to be forced to treat your customers fairly. How would you go about balancing the important job of preventing specific detriment in relation to certain products with that of more widespread consumer detriment if an intervention were to cause and trigger another crisis?

Peter Vicary-Smith: I think our view would be that we accept, albeit reluctantly, that there needs to be a veto of some kind in there. I remember during the financial crisis and the takeover of HBOS by Lloyds that I was the only person, I think, who stood up and said, "Only the Government can tell whether this is right or not right now. If they think it is right we will just have to kind of accept that." There are some things that have to go outside the normal frame for reasons of systemic market problems. But it is important that when that veto takes place, it should trigger an open inquiry and report into why it was exercised so that we can all see after the event that the thinking that went into it was correct, that there was a market problem that needed to be addressed, that it was being used appropriately and not being misused, so if you like it is that post-event accountability. I recognise that the veto has to be there, but there has to be post-event accountability.

Q175 Just on that point of post-event accountability, is there anything you have seen in the legislation or any of the FSA documents that would suggest that the regulator, in exercising a veto, would be obliged to explain the reasons publicly for that exercise?

Peter Vicary-Smith: I haven't myself seen something that would imply that is there yet, no. That is something I would like to see, be it in legislation or in conduct rules.

Read the full transcript here:

http://www.publications.parliament.uk/pa/cm201012/cmselect/cmtreasy/uc1574-iii/uc157401.htm