Korea Capital Market Institute

The study investigates the recent changes in the UK financial conduct regulation and supervision, more specifically, the regime reorganization for financial consumer protection in treating customers fairly, principle-based regulation, and judgement-based supervision. The study understands that the three components above work systemically for the financial consumer protection regime in the UK. The concept of treating customers fairly provides a clear understanding of who should protect financial consumers, who should be protected to a greater extent, and how far the protection should go, which are all critical for establishing an effective and efficient regime for financial consumer protection. Principle-based regulation allows financial firms’ discretion of how they treat financial consumers fairly in detail and at the same requires them to be responsible for how they treat financial consumers in truth. After the 2008 global crisis, judgement-based supervision was also newly introduced to enhance the effectiveness of principle-based regulation in the UK with the intention of proactively preventing the fundamental reasons of financial mis-selling and mis-buying and to ultimately restore consumer confidence. Based on these findings, the study suggests that Korea needs to clearly define consumer protection, enhance financial firms’ discretion and responsibilities on consumer protection, and strengthen regulators’ capabilities for guiding firms’ conducts.