This announcement was made in a speech by Clive Briault, Managing Director of Retail Markets to the British Bankers' Association (BBA).
The speech (available at www.fsa.gov.uk/pubs/speeches/sp215.html) given at the BBA's Annual Retail Banking Conference set out the retail agenda of the FSA and detailed how the organisation is seeking to make retail markets and services work more efficiently and effectively.
It focuses on the three key elements of an effective retail market: capable consumers; clear and understandable information available for consumers; and soundly managed and well capitalised firms who treat their customers fairly.
On the subject of how customers are treated by firms, Clive Briault acknowledged the work that has been done by many firms before and since the FSA's 'Treating Customers Fairly – progress and next steps' paper was published in July.
However he continued: "Despite these improvements, we remain concerned about the treatment of consumers of retail financial services, including in retail banking. We have seen cases of firms developing products without assessing which consumers these products are likely to be suitable for, which consumers they are not likely to be suitable for, and how the products are likely to be sold and advised upon in practice. We see reward systems that incentivise sales forces and branch staff to deliver volume targets without any measurement of the suitability and the quality of those sales. And we continue to see cases of poor complaints handling."
The FSA is looking to the senior management of firms to build the principle of treating customers fairly into their firms' culture, day to day operations, and for firms to consider fair treatment of customers at each stage of the product life-cycle.
Clive Briault said: "Looking ahead our approach will depend on the behaviour of firms. If firms do not embrace the principle of Treating Customers Fairly we will reconsider how best to achieve the fair treatment of customers, be it through the introduction of ever more detailed rules or tougher enforcement action.
"But we would much prefer not to have to introduce ever more intrusive regulation as a means of countering the poor treatment of customers. This would not be the best interests of either firms or consumers.
"We would therefore much prefer to see fewer detailed rules, and to rely more on an intelligent, thoughtful and effective implementation by firms of the high level principle that they must treat their customers fairly. We see a payback for firms from this in both market-based success and less intrusive, and therefore less costly, regulation."
The FSA has set up a Consultative Group, which involves industry and consumer groups, and will be helping firms to understand what constitutes the fair treatment of customers through a series of good practice case studies that can be used as form of benchmark guidance.
Clive Briault concluded on the subject: "We realise that an approach based on high level principles rather than detailed rules will be challenging but we believe this is the right direction for you (firms), and for us, to go."
