Red tape 'strangling financial services'

THE surging cost of regulation is in danger of paralysing the financial services industry, according to an official report.

It says the Financial Services Authority has overburdened the savings industry with regulation, sharply raised the costs of doing business and its staff are insensitive to the industry's needs.

The survey, conducted by the Financial Services Practitioner Panel which is headed by Prudential chief executive Jonathan Bloomer, is damning about the FSA's bureaucratic procedures, set up by the Treasury in 1997 as part of an effort to clean up the City.

Bloomer says on the whole the FSA is seen as a 'good thing'. But the survey makes it clear that small and medium-sized financial firms could be endangered by regulatory burdens.

Up to 50% of firms that responded to the survey disclosed that regulatory costs now amounted to 10% of business expenses.

The survey found that regulatory costs can be handled by bigger firms like the Prudential, but are seriously hampering smaller financial advisers.

Some two-thirds of respondents said the FSA was giving too much emphasis to consumer protection instead of fighting City wrongdoing.

FSA chief executive John Tiner rejected the findings saying: 'We pursue consumer protection in conjunction with our other activities.'

The survey went out to 3,017 firms and their executives and received a 48% response rate.