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Don’t Be Scared to Innovate, U.K. Finance Watchdog Says

Financial firms mustn’t be so scared
of their regulators that they fail to develop new investment
products, according to the industry’s top U.K. watchdog.

Middle-income groups aren’t being well-served by financial
firms because banks and investment advisers have pulled back
from providing advice and products in the wake of scandals
involving the mis-selling of insurance and manipulation of
benchmark interest rates, Martin Wheatley, chief executive
officer of the Financial Conduct Authority, said in a speech at
Bloomberg LP’s European headquarters in London today.

“We can’t let innovation and development be blighted by
the fact we still have some scandals that we’re dealing with,”
Wheatley said later in an interview with Bloomberg Television’s
Guy Johnson and Olivia Sterns. “We want firms not to be so
scared of innovating and making changes in the industry that
they won’t bring through the products that people need to
save.”

The FCA is softening its tone to firms since Wheatley led a
crackdown on executive bonuses and retail-banking sales
practices last year. U.K. banks have set aside more than 13
billion pounds ($22 billion) over the past three years to
compensate customers who were sold payment protection insurance
they didn’t need. Lenders still face probes into allegations
that key currency and commodity benchmarks were manipulated.

Mobile Apps

The FCA has set up a regulatory working group to gather
information on how financial firms and consumers use technology
such as mobile-phone applications to pay bills and move money,
Wheatley said.

London has the capacity to be the European trend-setter
in a booming tech scene,” Wheatley told banking executives at
the speech. The FCA will aim to provide an “environment that
encourages that innovation,” Wheatley said.

The regulator will start seeking views next week from the
industry on its plans to foster and monitor advances in
technology, including virtual currencies, he said.

Officials in Europe are weighing plans to regulate digital
currencies. The European Banking Authority warned consumers
about the risks of investing in cybermoney such as Bitcoin in
December.

To contact the reporter on this story:
Ben Moshinsky in London at
bmoshinsky@bloomberg.net

To contact the editors responsible for this story:
Anthony Aarons at
aaarons@bloomberg.net
Edward Evans, Heather Smith

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