ABSTRACT
The claim that the regulation of financial services in Britain is in crisis might seem surprising given the relatively recent legislation (Financial Services Act 1986, hereafter FSA), which led to the implementation of a comprehensive regime in 1988 for the regulation of such services. Although retail financial services are included under that regime, the main impetus for reform came from the wholesale side. In particular, Britain’s international role as a financial centre was held to be under threat as a result of the anachronistic, exclusive culture and institutions of ‘the City’, epitomized by the refusal of the Stock Exchange to allow foreign members and its insistence on managing share dealing through the firmly segregated stock jobbers or market makers and brokers who bought shares for customers, both of them with very limited capitalization by American or Japanese standards (Clarke 1986). It was to the establishment of a level playing field with clear rules of play that the reforms were directed; the regulation of the retail sector at the same time was something of a side show and, in any case, partial. It included only those products and services which could be readily identified as investments, particularly those with long-term implications. In practice, this mainly involved life assurance, unit trusts and personal pensions, followed, when they became available, by personal equity plans (PEPs). Mortgages, which (so far as they were being sold by building societies) had been traditionally regulated by the Building Societies Commission, were excluded. Banking services generally were also excluded, as were term and risk insurance.
