More on financial transparency – a response

The below is my response to Leigh at Knowing and Making discussing further the financial product transparency plans in the Conservatives’ ‘Plan for Sound Banking’ (See here for my summary)

I wanted to read the actual document before commenting further. Which I have now done. The way it is set out in the policy document is a lot clearer than the couple of lines in Peston’s post (on which I based by initial reaction).

The idea of getting providers to send out a ‘price list’ and a breakdown of their usage over the previous year makes a fair bit of sense. As a first point it will help customers appraise their own usage and think about whether the deal they are getting now is right for them (although people having sound financial awareness would be a necessity in this case).

Although I am not so sure about forcing them to provide machine-readable raw data for customers to put into a price-comparison site. What format are they going to use that customers (non-technical included) are going to know what to do with, let alone have all institutions agree to implement a common format in the first place? Having the data organised in a standard way, allowing customers to manually plug in the numbers on a website would be perfectly acceptable. But what is to stop a financial institution from coming up with a revolutionary new type of charge, what happens then?

I am a bit uneasy about it being a statutory requirement, from a free-market point of view, as I think there are sound business reasons for companies to be more open and up-front about such things. If they believe in the service they provide to customers they should have nothing to fear from easier comparison, I think they should be doing it voluntarily. Bet they would like to not have to pay any commission too, so open-source comparison sites could be welcomed.

Definitely agree with the idea of cutting out the rating agencies. But that is a slightly different case from arguing for the consumer side of things as it will be ‘expert’ commercial entities doing the analysis and comparisons; not lay people. Will be interesting to see how they implement it!

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