Consumer protection as justification for regulating financial-services firms and products

I first review regulations imposed to protect consumers of banking, securities, and insurance. Then I delineate and examine six regulatory goals: (1) to maintain consumer confidence in the financial system, (2) to assure that a supplier on whom consumers rely does not fail, (3) to assure that consumers receive sufficient information to make "good" decisions and are dealt with fairly, (4) to assure fair pricing of financial services, (5) to protect consumers from fraud and misrepresentation, and (6) to prevent invidious discrimination against individuals. In particular, I examine closely the rationale for the U.K. Financial Services Authority, created in 1998, because it might serve as a regulatory model. I conclude that capital regulation is useful for the second goal (failure), but regulations specific to financial services are neither necessary nor desirable for the other goals.