FSA warns of "turf war" if its powers are broken up
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The FSA has admitted that reform of its conduct supervision is needed, but warned that a turf war could break out if its enforcement activity is separated out among different bodies.
FSA chief executive Hector Sants (pictured) told Bloomberg in London today that the regulator needs to maintain a concentrated enforcement function with clear responsibility for investigating and punishing misconduct.
He said: “I strongly believe that dividing responsibility for enforcement activity would invite a fragmentation of approaches and a turf war between the different bodies involved.
“This was apparent in the structure which predated the creation of the FSA when the then multiple regulators struggled to speak with a united voice and lost authority as a result. Our credible deterrence philosophy complements our more intrusive and intensive style of supervision.”
Sants also admitted that the treating customers fairly regime has failed consumers.
He said: “Historically the FSA was, in practice, operating a twin peaks system. The oversight of the domestic institutions focused on the treating customers fairly programme. However, this focus has not delivered the outcomes that consumers deserve.
“This is because old-style consumer protection regulation is, in my view, largely reactive not proactive.”
The FSA has also claimed that the financial industry has failed to take “collective responsibility” for the economic crisis.
Sants said while the FSA’s new intensive supervisory regime is delivering financial stability, reform will only come if both the regulator and the regulated are “committed to genuine change”.
Sants said: “There remains, I believe, an absence of the acceptance of collective responsibility for what has happened. I personally remain unconvinced that all senior management have taken on board the need to change and operate in a genuinely different manner.
“I believe it is important to recognise that there are limits to what regulatory rules can achieve. It would be a mistake not to recognise that some of the failures which have occurred have their roots in the issues of culture and behaviour.”
Sants warned that the FSA will be increasingly proactive in testing risks inherent in products from their development and using techniques such as mystery shopping to test the true outcome for consumers.
He also said the FSA will consider how it can assess senior executives’ impact on an institution’s culture as part of its authorisation regime in an upcoming discussion paper.
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Readers' comments (36)
Man in Black | 9 Nov 2009 4:18 pm
I would refer Mr Sants to Section 14 of the Civil Service Code (though this lot probably denies that it applies to them).
Splitting up the Regulator is a party political matter. It is a pledge of the next Conservative Government to scrap Labour-FSA's structure. Ergo, Sants should keep his mouth firmly shut on the subject.
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Elton Wiseberry | 9 Nov 2009 4:28 pm
Stable horse bolt.
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Mark Coffer | 9 Nov 2009 4:36 pm
For as long as the chiefs of Britain's major financial institutions and the regulators whose job it is to uphold the integrity of same continue to be motivated by greed at the expenses of the consumer nothing will change. Fundamental problems demand fundamental solutions, anything less is futile.
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Anonymous | 9 Nov 2009 4:36 pm
"Shutting the stable door after the horse has bolted" comes to mind.
The FSA was asleep on the job and failed miserably in its duties to regulate.
How could it fail to see that offering mortgages of 125% of valuation, or self certified mortgages were sustainable business models.
In its failings to regulate these areas the FSA is complicit in relying totally on the assumption that house prices can only ever increase in value.
Mr Sants is now looking to pass the buck and excuse the FSA from its deriliction of duty.
The FSA/Government/Monoploies and Mergers Commission has also been negligent in allowing Lloyds TSB to swallow up HBOS at a terrific cost to Lloyds TSB shareholders.
The incompetence and arrogance of the FSA beggars belief.
The only teeth it has is that of a bully, able to threaten and bully small IFAs into submission but totally out of its depth and s**t scared when it comes to regulating the banks and large financial institutions. All the while drawing large salaries and paying large bonuses!!!!!!
How will the FSA mystery shop the next complex financial instrument/package put together by the wide boys in the banking sector. The banks senior executives could not understand the securitised sub prime mortgages. What hope of the FSA understanding such strucutre let alone being able or willing to regualte them?
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Anonymous | 9 Nov 2009 4:40 pm
Struggling to compare the list of FSA successes with their failures.
On the sucesses - hmm, was it pensions, no can't have been, there was a mis-selling review. What about opt-outs - no can't have been that either. FSAVCs - no that didn't work either, mis-sold too. Must be endowments then, with retrospective rules (MPs take note) - no wrong again - or precipice bonds, or self cert mortgages, or 125% mortgages, or Banking!! (small issue). Got bored thinking of the list now.
Let's face it Hector why should there be any confidence at all in what you are planning. The turf war can't have been worse.
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Anonymous | 9 Nov 2009 4:41 pm
Sants said: “There remains, I believe, an absence of the acceptance of collective responsibility for what has happened. I personally remain unconvinced that all senior management have taken on board the need to change and operate in a genuinely different manner.
Ahem ... ...
Et tu, Brute??
Words definitely intended for the FSA, methinks!! :-)
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Anonymous | 9 Nov 2009 4:45 pm
Rules but no rules. How about increasingly intrusive supervision? As you once said, you can't have principles based regulation when too many of the regulated don't have any principles, whatever level of qualifications they may have achieve.
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Anonymous | 9 Nov 2009 4:45 pm
I wonder how big a bonus he will get if he manages to convince the Tories that they should keep the FSA and not scrapping it after the election.
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Paul Violet | 9 Nov 2009 4:54 pm
How many chances do the FSA want?
They've almost criminally wasted the last goodness knows how many years, in the biblical sense looking at the speck in our eyes whilst ignoring the plank in their own.
It's all too late for the lame FSA to start getting heavy.
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Tony R Watson | 9 Nov 2009 4:55 pm
Please everyone stop blaming self cert and 125% mortgages for the downfall of the economy. The amount of bad mortgages written in the uk are minute compared to losses that the banks and investment company's have sustained.
Put the blame square on the shoulders of the banks and their get rich quick schemes and the inability of the government to regulate them
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