Stephen Timms

Treasury minister Stephen Timms has defended the Financial Services Authority following an attack on the body by a right-wing think tank.

The financial secretary said the watchdog was doing an "extremely effective job" after the Centre for Policy Studies (CPS) criticised its work on Friday.

The CPS described the regulator - created by Labour - as "one of the most powerful, and one of the least accountable institutions created in the UK since the war".

"Its lack of accountability is now nurturing a sense of disengagement and growing disillusionment within the financial services industry," said the think tank.

"The industry also feels that the FSA is vulnerable to political direction and influence."

However, Timms said the report did not concur with independent evidence.

"The FSA is an independent, world leading financial regulator and the City remains the envy of other financial centres," he said.

"The FSA does an extremely effective job balancing the interests of consumers and industry while maintaining high levels of investor confidence in markets.

"The recent two-year review of the Financial Services and Markets Act 2000 involved various reforms which are keeping the UK's regulatory framework at the forefront of international best practice."

Box-ticking

But Liberal Democrat Treasury spokesman Vincent Cable said he shared some of the CPS' concerns.

"The FSA concentrates too much on box-ticking regulation and not enough on redress for the consumer," he claimed.

"I am concerned that the financial ombudsman is too weak to protect consumers and a number of my constituents have found dealing with the ombudsman extremely unsatisfactory.

"In its review of financial regulation the government must strengthen consumer protection."