The UK’s new financial services regulator will be tougher and bolder and will intervene earlier to prevent dodgy financial practices and products being sold to consumers.

The Financial Conduct Authority (FCA) is due to start at the end of 2012, when the Financial Services Authority (FSA) is split into two. It will have a stronger consumer protection focus than the FSA. 

A new Prudential Regulation Authority operated by the Bank of England will supervise deposit-takers, insurers and some significant investment firms. 

The FCA’s establishment is a response to large scale mis-selling of financial products to UK consumers. The industry is estimated to have paid over £15 billion ($22.3 billion) in compensation in recent years from sales of pensions, mortgage endowments, trusts and payment protection insurance (PPI).

The structure of the FCA is still under discussion, but a strategy document says it will have new powers to direct firms to withdraw or amend misleading financial promotions immediately. 

The head of the FSA’s Conduct Business Unit, Margaret Cole, says the FCA will have a stronger focus on fair treatment of consumers and will be structured to identify problems and intervene earlier.

“In the past the tendency has been to concentrate on whether the internal processes of firms were working adequately,” she said. “The FCA will shift away from this approach to focus on outcomes which will make a difference to consumers.”

Ms Cole says failures by financial services firms have severely damaged the industry’s reputation. “The industry has the challenge of developing a culture of responsibility.”

A document on the FCA’s approach to regulation says its single strategic objective will be “protecting and enhancing confidence in the UK financial system”.

Financial Services Consumer Panel Chairman Adam Phillips, whose group will advise the FSA on consumer issues in financial services, has called for the FCA to put consumers at the heart of its regulatory structure.

Mr Phillips says it will be important that the FCA has the appetite to use its new powers as well as “a willingness to intervene before problems get serious and a recognition that the root causes of detriment need addressing as well as the symptoms”.