Saturday, April 12, 2014

U.K. FCA Chief Says Behavioral Economics Is a Game Changer

The U.K. Financial Conduct Authority has embedded behavioral economics in its regulation of the financial markets, according to FCA Chief Executive Martin Wheatley. There is now little doubt that behavioral economics could have a profound impact on many of the most serious challenges facing regulators and policymakers today. The FCA is already seeing significant possibilities across a range of UK markets. There is also opportunity for behavioral economics to support more specific issues like complexity; consumer inertia; marketing and the impact of firm communications to consumers. In recent remarks, The FCA is active in all these areas, he noted, using behavioral analysis to help collect better management information. Behavioral economics is quickly becoming a game changer, he noted, not just for firms and investors, but potentially for the shape of regulation for many years to come. The FCA is interested in its potential to change corporate behavior or help investors consumers as well as for the opportunities it offers for self-reflection. One of the areas the FCA is investigating is whether behavioral economics can offer the FCA insights into how individuals within organizations behave and respond to regulation. This goes to learning about the way the FCA intervenes within markets. It could help answer the question of whether day-to-day interventions, which the FCA relies on, are as effective as the agency imagines them to be.

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