The UK Financial Services Authority (FSA) has been given the message by its government: cut the cost of compliance. The authority says it will now move to a more “principles-based” model to regulate the 27,000 companies it regulates.

CEO John Tiner says the current approach to regulation ­– “a hybrid of high-level principles and detailed rules and guidance” – will be changed significantly towards the principles-based approach.

The UK Government said last week it wants to cut corporate red tape, with Prime Minister Tony Blair calling for cuts in business administration costs. Tougher reporting rules for companies have also been put on hold.

Mr Tiner says the FSA will now encourage industry to come up with solutions to market failures rather than use regulation.

He says the authority has relied on intermediaries to provide clear payment and pricing mechanisms for customers, and has adopted a similar approach in its attempts to get the insurance industry to improve the speed and clarity of its contracts.