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Categories:Regulation

Passing the buck?

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Nicole Blackmore
The Adam Smith Institute has slammed the FSA’s response to the financial crisis, saying its failure to recognise the extent of its own failings compromises its ability to improve regulation.

Authors of the report Tim Ambler and Keith Boyfield say the central problem is the FSA's "self-obsession and self-justification".

Their report, Regulatory Myopia, says the FSA should be streamlined, rather than expanded, and core responsibilities should be given to other bodies.

Adam Smith Institute director Eamonn Butler says: “Instead of being expanded, the FSA should be scaled back to what it can actually achieve, and more weight given to existing market-restraint structures, such as the Financial Reporting Council, the Accounting Standards Board and non-executive directors.”

The report claims that the FSA has introduced “red herrings” such as international responsibilities, hedge funds and offshore funds to distract readers from its own responsibility in the crisis.

Should the FSA be scaled back and supervision of the banking system be given to the Bank of England? How can the performance of the FSA be judged moving forward to minimize further regulatory failings? And who should the FSA ultimately answer to on a formal basis?

Post your comments below.

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Readers' comments (13)

  • Passing the buck?
    At last, objective assessment from an authoratitive body. This confirms what FSA always has been, a Quango with a vast appetite and no benefit to anyone but its own growth and earnings.

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  • Epically Myopic Leviathan
    The FSA needs to justify its existence, after 24 years of no visible benefit to consumers this is getting harder by the day. The Leviathan lashes out at small fry, tiny specks on the landscape of regulatory flotsam and jetsam. Today Darling told us not to blame the regulatory system, does that mean the regulators themselves can be blamed? When you create something and declare to planet earth "behold, a one-stop regulator, the best in the world", put egotists in charge, make them immune from prosecution, make them more powerful than the judiciary, fail to drag past and present board members into a proper grilling you get what we have here right now. Will it change? I would like to hope so but history doesn't give me much hope.

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  • Passing the buck?
    The FSA should not merely be "scaled back" but subjected to root and branch reform. It should also be deeply investigated and held to account for its virtually total lack of regulation of the banks whilst at the same time persecuting the IFA sector almost out of existence. The FSA's administrative functions should be relocated to a vastly less costly site outside London, which alone would save the industry a fortune every year, not to mention being forced to sell off its extravagant collection of objets d'art. Oh yes, its bonus culture should be consigned to history (bonuses for what? Failure.) and it should be forced to comply with directives issued in accordance with the Freedom of Information Act instead of using industry money to fund endless appeals. And then, of course, there's this business of its refusal to allow IFA's the protection of law in the form of the 15 year longstop for complaints. Hindsight reviews of areas of business that the FSA failed to regulate properly at the time that business was transacted should also be outlawed. And those are just the things that spring readily to mind. The FSA is not fit for purpose. Everybody knows it, so why is it allowed to continue bleeding the industry white whilst manifestly failing to do its job properly? The FSA is not a world class regulator. It is a thoroughly discredited gravy train for the fortunate few and a disgrace to the industry and to the nation.

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  • Passing the Buck
    This is the way forward, the FSA has failed to do it's job and awarded itself bonus's. It should be scaled down and regulated by an accountable body not more bureaucrats. We need much more accountabilty in government and regulation.

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  • FSA
    Every member and employee of the FSA should be fully accountable for life - just like IFAs

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  • The Adam Smith Institute and tthe FSA
    IT IS GRATIFYING TO SEE A RESPECTED BODY ACKNOWLEDGE WHAT WE AS IFAs HAVE LONG BELIEVED, THAT THE FSA ARE OBSESSED WITH SELF JUSTIFICATION AND SPEND THEIR TIME, LIKE DON QUIXOTE, TILTING AT IMAGINERY WINDMILLS. THEIR EXISTENCE HAS NOTHING TO EITHER FURTHER THE CAUSE OF CONSUMER UNDERSTANDING NOR THE CAUSE OF INDEPENDENT ADVICE

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  • FSA
    The ASI is an excellent free market do tank. This is exactly what I have been saying for years, only much better put and with real academic rigour. The FSA is an out of control Stalinist bureaucracy which, now that it has (predictably) epically failed, has turned to shooting people to justify its existence.

    I endorse all the SAI says.

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  • FSA lost its way
    Until we stop the merry-go-round at the top of the FSA of people who are too easily influenced by politicians and Bankers we will not have the regulator we deserve and the consumer will not have a regulator that is able to protect them. The latest debacle of regulation of the banks and how the banks had the ear of the FSA such that the debacle of RDR is being forced upon us to enable the banks to gain mkt share is typical. We need lay people, experts in their own field to oversee the excesses of the FSA. The general public are appalled at the lack of regulation. What we need is the general public having a say directly within the FSA and influencing what the FSA does.

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  • QUANGO, QUANGO, QUANGO
    If its mammoth failure to regulate the banks proves anything it proves that the whole concept of the FSA is misguided. We desperately need to have a completely independent regulator that is not beholden to the Treasury to regulate the banks and go back to having separate regulators for the insurance & investment companies and the IFAs as we had in the days of LAUTRO and FIMBRA, but this time they should not be self-regulating. Only then will we get real regulation that might investigate nonsense like the Arch/Cru fiasco BEFORE it happens. Solicitors, estate agents and accountants should be completely banned from providing "incidental" financial services. I know a little bit about some areas of the Law, does that mean I can offer incidental legal services?

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  • Completly rebuild the FSA
    I am struggling still to comprehend how the FSA can be funded by the Industry it regulates, staffed by people from the industry it regulates and then is expected to regulate that Industry. I have tried over an 18 month period to complain about the Aviva reattribution through the FSA and they simply refuse to allow any criticism and invent rules to stop any complaints. They are a complete shambles. I agree the FSA needs complete root and branch reform. They need to train their own inspectors not employ bankers and Insurance executives on a revolving door principle. They are a disgrace and have led the UK into a deep recession. People should be in jail not being paid bonuses.

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