FSA says it's not our job to do your risk checks

20 October 2011 | By Natalie Holt

The FSA has told firms it is not the regulator’s job to carry out risk management and internal audits on their behalf and warned these functions are not being carried out sufficiently.

At the Association of Private Client Investment Managers and Stockbrokers annual conference in London last week, FSA director of UK banks & building societies Andrew Bailey criticised risk management practices within firms.

Bailey, who is also deputy head of the FSA’s prudential business unit, joined the regulator in April from the Bank of England where he was executive director for banking services.

He argued that the regulator should not be expected to carry out firms’ risk management and internal audits for them and said checking “a long shopping list of compliance points” is the responsibility of internal auditors.

He said: “It is dangerous if the supervisor is assumed to fill the role of the risk and audit functions. That is not our job. If we were to operate at that more detailed level, we would be much larger and, critically, we would lose our focus.”

He added it is important that risk management and internal audit departments are able to argue their case strongly within firms.

Bailey said: “To be frank, I think one of the relatively untold stories of the financial crisis concerns how little attention these functions have attracted. Boards and senior management are at the heart of the responsibility for running a firm. They must be supported by robust and well functioning risk and audit functions, both internal and external to support them.

“Unfortunately, when I look across the landscape, I do not believe we are in the right place today in terms of the role and influence of these risks and audit functions.”

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