‘Regulatory metrics’ is a phrase that is on a lot of politicians’ lips right now.
So why would policymakers, wrestling with a cost-of-living crisis, be so interested in sizing up the impact of financial regulation?
It’s because behind the cost-of-living crisis is an even deeper problem – low growth. Financial services have contributed to UK growth as its largest exporting service sector, but as the Conservative peer, Lord Hunt of the Wirral, said recently:
‘We must stop deluding ourselves about this… the UK is not pre-eminent in the world of financial services’. Part of the answer, he said, was ‘to strip away unnecessary redundant regulation’
But how do we tell what can stripped away, and what needs to be kept? Back in 2007, the National Audit Office reported on the effectiveness of the FCA, but the idea of one government agency overseeing the work of another conjures an image of Russian dolls: who regulates the people who regulate the regulator?
There is an opportunity here for the financial services professions to step up and create the right metrics for financial regulation. The CII has made a start on this vital area of work with its Public Trust Index. This gives professionals and policymakers an important steer about consumers’ concerns and priorities.
For example, it consistently shows that consumers are more concerned with quality of cover than price, but they become very upset when they find that they are paying more than others for comparable risks. This should help regulators to focus on quality of services and fairness between different groups of consumers, rather than creating a commoditised market that creates an artificial race to be the cheapest.
Regulatory metrics may be a dry subject, but the growth needed for schools, hospitals and national security depend on them.