People should be frightened of FSA, says Sants
The UK Financial Services Authority (FSA) will adopt a tougher, more intrusive regulatory policy, in an attempt to bring the fear factor back to regulation, chief executive Hector Sants warned today.
"There is a view that people are not frightened of the FSA. I can assure you that this is a view I am determined to correct. People should be very frightened of the FSA," he explained.
Sants described a new regulatory philosophy, dubbed 'the intensive supervisory model', under which firms will be judged on "the outcomes and consequences of their actions, not on the compliance with any given individual rule".
In recent years, the UK has operated under a principles-based regulatory system under which banks have been able to self-regulate so long as they had appropriate systems and controls in place. However, Sants said today that "markets did not self-correct" in the recent crisis, warranting a new style of regulation.
"It was not seen as a function of the regulator to question the overall business strategy of the institution or more generally the possibility of risk crystallising in the future," he said. Looking forward, "we will seek to make judgments on the judgments of senior management and take actions if in our view those actions will lead to risks to our statutory objectives", he added.
While the new regulatory style represents "a fundamental change", Sants insisted it does not constitute an abandonment of principles-based ideas. "We have significantly modified and adjusted our historical approach. We have not jettisoned it, but we have adapted it," he said.
From now on, "what principles-based regulation does mean and should mean, is moving away from prescriptive rules to a higher-level articulation of what the FSA expects firms to do".
However, he added that interventionism is not without its dangers: "This will of course carry significant risk, and our judgments will necessarily not always be correct with hindsight. Furthermore, too aggressive intervention will stifle innovation and arguably reduce risk to a level that inhibits economic prosperity."
To expand its supervisory capabilities, the FSA will recruit an additional 280 extra specialists and supervisory staff by the end of 2009, representing a 30% increase in personnel.
The FSA will provide more details on changes to the regulatory architecture in a discussion paper due to be published on March 18.
See also: Bank losses highlight flaws in FSA capital measures
The short story
FSA names chief operating officer
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Regulation
Industry calls for major rethink of Basel III rules
Isda AGM: Divergence on implementation suggests rules could be flawed, bankers say
Saudi Arabia poised to become clean netting jurisdiction
Isda AGM: Netting regulation awaiting final approvals from regulators
Japanese megabanks shun internal models as FRTB bites
Isda AGM: All in-scope banks opt for standardised approach to market risk; Nomura eyes IMA in 2025
CFTC chair backs easing of G-Sib surcharge in Basel endgame
Isda AGM: Fed’s proposed surcharge changes could hike client clearing cost by 80%
UK investment firms feeling the heat on prudential rules
Signs firms are falling behind FCA’s expectations on wind-down and liquidity risk management
The American way: a stress-test substitute for Basel’s IRRBB?
Bankers divided over new CCAR scenario designed to bridge supervisory gap exposed by SVB failure
Industry warns CFTC against rushing to regulate AI for trading
Vote on workplan pulled amid calls to avoid duplicating rules from other regulatory agencies
Bank of Communications moves early to meet TLAC requirements
China Construction Bank becomes last China G-Sib to release TLAC plans
Most read
- Top 10 operational risks for 2024
- Top 10 op risks: third parties stoke cyber risk
- Japanese megabanks shun internal models as FRTB bites