Legal Services Board chairman David Edmonds has hinted to MPs that the oversight regulator will be extremely cautious about letting banks enter the legal services market in the aftermath of the current financial crisis.

Edmonds and LSB chief executive Chris Kenny appeared before the Commons justice committee today (25 February) to answer questions about legal services regulation. Committee chairman Sir Alan Beith MP stressed that any perceived relaxation of regulation would not be seen as an attractive prospect for consumers in the light of the banking crisis. Beith then asked Edmonds if he would support banks setting up their own ABSs to offer legal services.

Edmonds replied: ‘The easy answer is to say "no" because it is difficult at the moment. Banks are too busy doing other things.’

He added later: ‘Relaxing regulation in other areas has not been in the consumers’ interest. We are conscious of what is happening.’

Edmonds assured the committee that the board will provide ‘proper and proportionate’ regulation of ABSs. The prospect of more legal services being offered through the internet, and of more high street names entering the market, was just ‘scratching the surface’ of its remit, he added.

He said: ‘There are new ways of providing legal services and it has to be properly and proportionately regulated. If Lloyds [TSB] and Tesco were to decide to create a venture to provide ABSs and applied for a licence, we would be responsible with the Law Society to set out rules and provide proper regulation.’