When FSA chief executive Hector Sants gave his now notorious speech warning that the financial services industry should “be very afraid” of the FSA, it marked a turning point in the relationship between the regulator and the regulated.
Sants is leaving the regulator at the end of June after five years as chief executive but will continue to be paid his annual £500,000 salary plus benefits until the end of December.
Ever since Sants was named as John Tiner’s successor in July 2007, he has fought an uphill battle. He joined the FSA in May 2004 as managing director of wholesale and institutional markets from Credit Suisse First Boston, where he was chief executive of Europe, Middle East and Africa. His investment-led background caused some to question if he was the right person to improve retail banking and see out the RDR.
The run on Northern Rock came just two months after he became chief executive. It was largely left to Sants to explain the FSA’s failures in supervising Northern Rock, which was taken into public ownership in February 2008. As the financial crisis took hold in September 2008, the finger of blame was pointed at the FSA amid mounting criticism that the regulator should have acted sooner to prevent it.
The result was Sants’ “be very afraid” speech in March 2009. He said: “There is a view that people are not frightened of the FSA. I can assure you this is a view I am determined to correct. People should be very frightened of the FSA.”
Lansons director of regulatory consulting Richard Hobbs says: “Sants will be remembered for the ’be very afraid’ speech. In effect, because the FSA is a political football, the regulator was trying too hard to use rhetorical flourish as a substitute for immediately visible credible action. The speech was ill-judged and brought the FSA resentment.”
That was aggravated by a series of appearances by Sants in front of the Treasury select committee as part of its inquiry into the RDR. Giving evidence to the committee in November 2010, Sants told MPs that losing up to 20 per cent of the IFA population was “acceptable” to deliver the improvements from the RDR. His subsequent apology last March failed to pacify advisers’ anger.
In November 2011, Sants was forced into another apology, this time for the FSA’s abrupt dismissal of TSC recommendations that the RDR should be delayed by a year, before the recommendations had even been published. MPs branded the ensuing apology “hollow”.
Tenet distribution and development director Keith Richards says: “Sants’ personal handling of the TSC’s RDR review last year was disappointing and unnecessary. It demonstrated to MPs the FSA had no regard for anyone’s view but its own.”
But Cicero Group director and chief corporate counsel Iain Anderson believes Sants will also be remembered for driving change at the regulator in the wake of the financial crisis.
Sants has not only been responsible for the transition of the FSA to become the Prudential Regulation Authority and the Financial Conduct Authority but also in hammering home the message that the regulator will look to intervene earlier to prevent consumer detriment.
Anderson says: “We have moved from light-touch regulation to early intervention, where the regulator is aiming to be all-seeing and all-knowing. That is a huge change, and not just in the organisation’s structure but also in the regulator’s modus operandi.”
- Overseeing the FSA’s transition to the Prudential Regulation Authority and the Financial Conduct Authority as part of the regulatory restructure
- Bringing in an era of intensive and more intrusive regulation, marking a shift away from light-touch regulation
Where Sants got it wrong
- His warning to the industry to “be very afraid” of the regulator in March 2009
- Telling the Treasury select committee that losing up to 20 per cent of the IFA population is “acceptable” in order to deliver the RDR
- The FSA’s dismissal of the TSC’s recommendation to delay the RDR by a year, before the TSC report had been published
’Overpaid, over-rated and overdue departure’ – advisers give their views as Sants quits
He has always struck me as arrogant and unwilling to listen to anyone who does not agree with him. I will not be contributing to his leaving present, unless one includes all the money I have paid in my FSA levies. Good riddance.
No one person has done so much damage to our industry and to the public as this man.
So he is running away before he sees the RDR fiasco through. There is still far too much change being implemented too quickly that will be massively detrimental to clients.
This is excellent news but we need to be careful what we wish for. There are plenty more where he came from.
Overpaid, over-rated (certainly by Turner) and an overdue departure.