LONDON The FCA lacks clarity and must be bolder about protecting consumers hit by years of misleading sales tactics, two former top policymakers said on Thursday.
The financial crisis prompted Britain to scrap the decade-old Financial Services Authority and replace it with the Financial Conduct Authority in April.
It supervises some of the world's biggest foreign exchange, stock, bond, commodities and derivatives markets.
FCA non-executive chairman John Griffith-Jones said in his maiden speech that he was developing a "radar screen" to spot problems earlier and stamp out bad behaviour such as Libor interest rate rigging.
But Hector Sants, who headed the FSA until last year, and Paul Myners, financial services minister during the financial crisis, said the FCA had its work cut out.
Myners said moves toward tougher supervision began under the FSA and that Griffith-Jones had made a safe speech that left him a little disappointed.
Britain's banks have so far paid out over 10 billion pounds in compensation for misleading consumers about loan insurance, the latest in a string of sales scandals spanning two decades.
Myners said many of the directors and non-executives at lenders that sold loan insurance were still in their jobs.
"I would have liked to have got a sense the FCA had a more challenging position. I didn't really hear that," Myners told the event organised by CityUK, which promotes Britain as a financial centre.
"I fear the FCA, like all regulators, runs the risk of being captured by the regulator. I did not hear a radical agenda."
Sants, part-architect of Britain's new supervisory system, said there were several areas where "greater clarity" was needed to help restore public trust in financial services.
"We need to understand a bit more clearly what the FCA's risk tolerance actually is," Sants said.
The FCA's approach to the wholesale market and the extent to which consumers are responsible for what they buy were also unclear, said Sants, who heads compliance at Barclays Plc.
"To reset the agenda between firms and consumers you have to be bold," Sants added.
Etay Katz, a financial services lawyer at Allen & Overy, said there was a "waiting game" as banks sought clarity from the FCA on how they can develop new products.
"The trick is to look at the radar and capture the right target and not use a scattergun approach and create a lot of collateral damage along the way," Katz said.
Griffith-Jones, a former head of KPMG accountants in the UK, said it was early days and the FCA board and executives were determined to get it right.
"I think we have got off to a respectable start. Even if you have doubts, give us the benefit of them," he added.
(Reporting by Huw Jones. Editing by Andre Grenon)