The expression “Safety Net” comes from the net at the circus. In this paper, I use the term to narrow the limits for investing household funds so as to avoid risk. First I reviewed the situation in the U.K. There, the Big Bang in securities began in 1986, more than ten years earlier than in Japan. At that time, they also enacted the Financial Services Act as a Safety Net to protect individual investors. But in reality they experienced various financial problems very rarely seen in history. Among them, the case of the mis-selling of personal pension schemes was the most serious. The authorities have imposed an obligation on the pension schemes providers to compensate those who were mis-sold personal pensions. Eventually 3 billion pounds were refunded to 400 thousand people.
To improve such situations, the Labour government started the second Big Bang in 1998 and unified with administration bodies to the FSA, The Financial Services Authority, an independent non-governmental body, under the Financial Services and Markets Act last year.
While we can see trial and error cases in the financial history of the U.K., in the U.S., official regulations have been alleviated in the area, but various kinds of safety nets have still been kept by the government, the business world, non-profit bodies, consumer organizations, and so on. In America, competition in the financial world also makes a safety net for household funds, because more attractive financial products are created through tough competition and they give people more choices.
In Japan, according to the Big Bang proposal, deregulation in the financial area is going on. And two new laws have been born to protect consumers-one is to regulate consumer contracts; the other is concerned with selling financial products. But the legislation is not inclusive enough.
I think the situation now in Japan looks like that of around the end of the ’80s in the U.K. So we have to take care to establish our Safety Net system and we can learn a lot from the experience of the U.K. and the U.S.
|