Financial regulation to be 'tougher and bolder'
The financial services industry faces "tougher and bolder" regulation, under plans for the forthcoming Financial Conduct Authority (FCA).
One of the successors to the Financial Services Authority (FSA), it will come into being by the end of 2012.
The FCA will oversee the way 27,000 firms, including banks, do business with customers and with each other.
It aims to prevent any more of the mis-selling that cost customers billions of pounds in the past two decades.
Margaret Cole of the FSA said the new body would be more proactive and interventionist than the FSA had been in the past.
"We will take action when a consumer detriment is building up, and not wait for it to crystallise first," she told the BBC.
In its 52-page consultation document on the powers of the new body, the FSA points out that past mis-selling scandals over private pensions, mortgage endowment polices, and split-capital investment trusts have cost customers about £15bn.
It said billions of pounds more in compensation - likely to be well over £5bn - will be paid when the current scandal over the mis-selling of payment protection insurance is finally resolved.
"The FSA recognises that, overall, its response to the mis-selling of PPI should have been stronger," the FSA said.
"Stronger action sooner could have limited the growth of the problem," it added.
A past criticism of the FSA has been that it watched problems building up, even when they were gaining widespread publicity in the media, and only acted once large numbers of people had been affected.
The FSA acknowledged it had been slow to react in the past.
"The response by society as a whole and, in particular, in Parliament and the media to the major mis-selling events since 1990, demonstrates that the FCA will need to have a lower risk tolerance than the FSA has had historically in this area," the FSA said.
Margaret Cole said its approach would change.
"We will be more engaged with consumer groups and will analyse what is going on, and look at consumer behaviour," she said.
"We will have new powers to make earlier interventions, including banning financial products and financial promotions."
The FCA will be a standalone body and will oversee the conduct of all financial services firms.
It will also be responsible for the "prudential" regulation of the finances of 24,500 firms.
Among them will be personal investment companies, insurance and mortgage brokers, investment managers, corporate finance firms, financial exchanges and travel insurers.
The prudential regulation of the finances of banks, investment banks, building societies, credit unions and insurers will go to the other successor body to the FSA, the Prudential Regulation Authority (PRA).
This will be a direct subsidiary of the Bank of England.
Hector Sants, the FSA's chief executive, said: "Trust in the financial services sector is at an all time low and the new regulatory arrangements provide the opportunity to restore confidence."