FSA announces final stage of internal operational reform

The UK regulator has revealed its new internal integrated operating infrastructure

LONDON - The UK Financial Services Authority (FSA) has announced the final phase of its operational reforms to better align its internal operating model with its core responsibilities of supervision, enforcement and risk mitigation.

The regulator says the new integrated operating structure is designed with an increased focus on international regulatory co-ordination, macro-prudential supervision of systemic risks and furthering consumer financial education.

"These changes will provide greater clarity, both internally and externally, as to the way we work and, in particular, reinforce our role as micro-prudential supervisor based on a model of integrated risk analysis and integrated supervision," said FSA chief executive Hector Sants.

"I believe the actions we have taken since the crisis began have shown the effectiveness of this model. This reorganisation will ensure our changing working practices and the way we make our judgements are successfully institutionalised," he said.

The reforms are direct consequences of the financial crisis, specifically the lessons learned from the Northern Rock debacle, which ended in the bank's nationalisation in February 2008, and the Turner Review in March this year.

The FSA says its reform will have six restructuring benefits: integrating retail and wholesale supervision into one unit; merging risk identification and management with policy formation under one roof; expanding its financial stability team into a new division; creating an internationally focused division; merging enforcement and financial crime into one division; and splitting its financial capability unit from the retail division, to form two standalone divisions.

"The new structure will underpin the radical changes we have made to our supervisory processes through the Supervisory Enhancement Programme (SEP)," said Sants. "SEP was designed to deliver a significant increase in our supervisory resource and changes to the way we work, in particular for 'high impact' or systemically important firms. The programme is on track and will be completed by the end of this year."

Sants says the internal reforms began two years ago in July 2007, when he took on his current role, and will take effect from October 1.