Dave B wrote:
. . . The key bit of information which is missing is (I think) your appreciation of what is covered by the FSA. It is not just "casino banks" (which is a stupid slogan anyway), but includes the trustees and advisers of your own company pension scheme . . .
I know that, Nick, in fact I think I mentioned it somewhere.
Oh! I which case I don't know why that is not apparent from your post...
I wonder how much prelaunch testing there is of these dodgy products, not only for potential gain but for collapse and all effects of that?
That's any interesting question, Dave. The answer is, that they do an enormous amount. But that doesn't always help. The Savings and Loans Trust (I think it was...) went spectacularly bust when things didn't go quite according to the script, and they had 2 Nobel Prize winners on the staff. Furthermore, the regulators (over here, at least,) refuse to examin any products before they are released. They just have a set of rules (which runs to about 30 volumes!) and tell the companies to abide by them all. The truth, ISTM, is that the FSA is too scared to authorise anything. Much safer to criticise once it goes wrong, rather than prevent it from going wrong in the first place. So would more regulation stop the odd defective product? Probably not.
There are also lots of rules about being precise about the degree of risk the consumer must expect (at least in retail financial services), but some "consumers" are deemed to be "professional investors". This would include just about every product offered by the "casino" banks. In these cases, it is held that the investors are sophisticated enough to do their own due dilligence. For retail sales, the FSA have a history of waiting for the disaster to happen before intervening. Not the best solution, IMO. Furthermore, the rules just seem to generate paperwork, and protect neither the customer, nor the provider. Just box-ticking. Furthermore, the FSA have a history of changing the rules retrospectively. This causes havoc with PI insurance, as it is impossible for the insurer to completely assess risk, if the risk my change retrospectively.
And I suppose I must come clean about a personal gripe. The FSA increased their fees in 2003, after 3 disastrous years for the stock exchange (and hence financial advisers) specifically because their final salary pension scheme was not performing well enough. Grrrr!!
I would love to know the real cost of these things to all of us, the cost of court cases, receiver's fees, police investigation etc., not just what the banks will claw back from us to pay for the fines and losses etc. their employees cost them.
The real costs include the huge sums spent on jumping through hoops, a lot of which prove to be ineffective. The other costs are recovered through the fines on offending firms. That's one reason for the fines.
And, as I've said already, these sums pale into insignificance when set against the costs the whole world is now suffering because of the actions of politicians. I'd dearly like to make Ed Miliband and Ed Balls financially responsible for their actions, but all they want to do is wound the government. They don't care about the consequences. Not one tiny little bit.