FSA will be ready to implement the bulk of the final CRD rules in two weeks

The board of the UK regulatory authority will be invited to make the majority of the final Basel II rules law within two weeks, stated the chief executive of the Financial Services Authority (FSA), John Tiner.

Referring to the Capital Requirements Directive (CRD), Tiner confirmed that UK law will be finalised for “the longest and most technically complex pieces of financial legislation to emanate from Brussels,” in the next fortnight.

Tiner said that while he appreciates that outstanding issues remain over Pillar II, the FSA will use the opportunity to foster a regulatory dialogue between the FSA and financial institutions. “I remain a firm believer that we should not seek to use Pillar II in such a way that renders the capital benefits that firms may get under Pillar I nugatory,” he said.

The regulator noted that home-host issues may pose some difficulty, and many banks are concerned that implementation of Basel II will pose problems. “We are all familiar with the potential difficulties that arise out of the decision to delay Basel II implementation in the US by two years. I am unable to provide a cast-iron guarantee that everything will be plain sailing,” he said.

Tiner emphasised that work with international regulators was ongoing to reduce the regulatory burden and minimise any cross-border issues.

Cost savings must not get in the way of effective regulation

Tiner also addressed the FSA’s new approach to regulation. He emphasised that while the new principles-based rules may reduce the cost of regulation overall, better regulation does not directly translate to cost reduction.

“Whilst we are serious about delivering, where justified, significant reductions in costs incurred by firms complying with our regulations, we will not do this where it undermines the effectiveness of regulation to secure market confidence, consumer protection and a reduction in financial crime,” he said.

However, Tiner emphasised that the FSA is continuing to search for and remove rules that are no longer effective or appropriate.

Tiner noted that many firms desired the certainty of prescriptive rules, and are concerned that useful guidance for implementing regulation will not be forthcoming. To this end, the FSA is going to release a discussion paper at the beginning of next month to outline its approach to an institution’s own guidance.

Mifid

Acknowledging that the recent suggestion to use benchmarking for best execution was hugely unpopular with the industry, Tiner said that marrying the requirements of the Markets in Financial Instruments Directive (Mifid) has proved an incredibly complex task. He said that discussions with industry are helping to shape UK implementation of the Directive, and that a new discussion paper will be released later this month.

Click here to see Tiner’s speech in full.

BaselAlert.com