Author Topic: BREAKING: Human beings not rational.  (Read 492 times)

Demolition_Squid

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BREAKING: Human beings not rational.
« on: January 25, 2012, 03:12:58 pm »
"You have to assume that you don't have rational consumers. Faced with complex decisions or too much information, they default ... They hide behind credit rating agencies or behind the promises that are given to them by the salesperson," said Mr Wheatley, in an interview with the Financial Times.

Martin Wheatley, the head of the Financial Conduct Authority (FCA), said regulators should ban potentially dangerous products to protect consumers from themselves, suggesting the FCS will be far tougher than the current Financial Services Authority in policing the retail investment market.

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This could be very interesting. It remains to be seen whether the FCA will be any more successful than the organization it is replacing (the Financial Services Authority) in regulating the financial services sector. Wheatley seems to be breaking the assumption that the FSA held, that investors are ultimately rational and markets can be understood as a collection of rational individuals... which could hopefully be a step in the right direction! It'll be a while before anything is decided. The roadmap is:

Quote from: FT.com
July 2010: Coalition government launches plan to break up the Financial Services Authority, creating the Prudential Regulatory Authority and a new consumer protection and markets authority

February 2011: Ministers decide the new consumer watchdog will be called the Financial Conduct Authority and will have the power to ban specific financial products or limit their distribution. Martin Wheatley named head of FCA

June 2011: Draft legislation unveiled. The FSA outlines the approach the FCA will take towards protecting consumers and regulating financial products.

September 2011: Martin Wheatley starts work.

Winter 2011: Parliament holds hearings on the draft bill and recommends that the FCA been given extra powers to regulate consumer credit and promote competition

Jan 31 2012: Treasury response to industry consultation and Parliament expected

April 2012: FSA supervisory teams to split in two and begin overseeing conduct and prudential regulation separately

May to August 2012: Legislation to be discussed, amended and adopted by Parliament

2013: PRA and FCA to open for business
Truly, though our element is time,
We are not suited to the long perspectives
Open at each instant of our lives.
They link us to our losses: worse,
They show us what we have as it once was,
Blindingly undiminished, just as though
By acting differently, we could have kept it so.

-Reference Back, Phillip Larkin