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Andrew Tyrie says changes may not fix FSA flaws

Treasury select committee chairman Andrew Tyrie has warned the Government’s intended legislative process to replace the FSA may not fix operational flaws.

New legislation is required to replace the regulator with the Prudential Regulation Auth- ority and the Financial Conduct Authority. A new bill can either amend and replace parts of the Financial Services and Markets Act 2000, leaving some parts on the statute book, or replace the FSMA completely.

The Treasury says that reform will be “best achieved” by amending and replacing parts of the act. But the select committee is calling for the legislation to be revisited in its entirety.

Speaking to Money Marketing, Conservative MP Tyrie says amending the FSMA could leave operational flaws. He says: “Fresh legislation would have been an opportunity to revisit what had clearly come to be seen as operational flaws. Witnesses have told us a good deal of what the FSA is doing is not generating the benefits we would hope for.”

During a February evidence session on competition and choice in the banking sector, Tyrie asked Treasury financial secretary Mark Hoban six times if a new bill would be introduced or changes would be made by “dog-eared amendments”.

TSC member Andy Love says: “There was calculated ambig- uity in what Hoban said. He said there will be a new bill related to financial services, whereas the chairman was asking him if we will be starting from the beginning.”

Tyrie says: “Although technically it is a new bill, it is a cut and paste job and there is a risk of importing legislation on areas of regulatory activity where it might have been better to think again.”

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Comments

There are 14 comments at the moment, we would love to hear your opinion too.

  1. The only change that needs to be made is to make the FSA and its replacements subject to the rule of law.

    The regulated need to be able to hold the regulator to account though the courts. Like the regulated, the senior management at the regulator must be made personally liable for their failings.

  2. It seems that Hoban is just as elusive with the TSC. Keep your teeth into him Mr Tyrie and get it sorted. You are almost certainly going to decimate our industry and all the good that it does within a very short space of time.

  3. Tom, I do not think this is the only change required but arguably the first.
    It is beyond comprehension that the managemenet at the FSA should continue in their current track without seroisuly looking in the mirror and pre-empting some of what these changes are suppossed to bring about.
    When Hector Sants said to the TSC that parliament should look at the FSMA, and not look to the FSA to be held accountable, yet more alarm bells should have sounded.
    It seems Andrew Tyrie is one of the few MP’s who have the measure of these people and is not intimated or mesmerised by their usual sound bites.

  4. Incompetent Regulators Awards Team 31st March 2011 at 1:59 pm

    As Tom Scott said any regulator should all be accountable for their mistakes and subject to the rule of Law. How many would we see in court if that was the case now? The place would fall apart.

    The only solution is a new Act and new staff with none of the Labour placed men.

    The FSA helped bring down the UK economy allowing the banks to run amok, that alone should be anough reason to make dramatic changes.

  5. Agreed with Tom Scott. The FSA is unconstitutional in that it has been granted powers in excess of its accountability. Power currupts, absolute power currupts absolutely.

  6. It sounds like Mr Tyrie is getting as sick as we all are with the Hoban / Sants regime. They cant even P*** straight, let alone give honest answers to valid questions.

    Having to ask Hoban 6 times for an answer, just shows you the arrogance of the man.

  7. The FSMA needs to be completely replaced.
    Andrew Tyrie knows this.
    It was rushed through when it was established, giving the fsa too much power, which is why we have so many problems such as no longstop no accountability for the regulator and a situation which is akin to being governed by a stalinist regime for the regulated.
    The fsa also needs to apply for its budget, rather than simply setting it at whatever figure it draws from thin air.
    The Leviathan is still very much alive Mr Tyrie, we are relying on you to tame it.

  8. The FSA & replacement needs a “root & branch” approach to changes. Madness is to keep doing the same thing time after time and expecting a different outcome. It is a folly to change the name of the FSA, keep the same people and operational status and expect a better outcome. Any other business would have had directors and employees sacked and proceedures & accountability put into place to ensure such a travesty would never happen again.

  9. The regulatory choo choo has hit the buffers. Or is it a Regulatory Humpty Dumpty? Either way all the Kings Horses and all the Kings men will fail to put it back together again…

  10. If only the FSA was required to observe the Statutory Code of Practice For Regulators, then many of these concerns could be addressed at a stroke. It’s Statutory which, as I understand it, means it’s the Law. Aren’t the TSC or Mr Tyrie even aware of it?

  11. Julian Stevens 1st April 2011 at 8:16 pm

    I’ve sent Mr Tyrie a hard copy of the Code and suggested that he acquaints himself with its content.

  12. Improvement requires a process of intelligent feedback in respect of all parties, not just thrust and counter thrust.
    So whilst a rewrite of the current legislation to bring the FSA within the Rule of Law is crucial, it is just as important to ensure that there is a meaningful process of dialogue imposed on all parts of the industry.
    Just to be told “you are doing it wrong”, from any party is not helpful. One needs to know and understand were the problem lies.
    At one level the aims of the FSA are not particularly different from that of Advisers – an improving outcome for clients. What that means and how it is achieved is the main stumbling block, and one that is likely to change the industry so radically that it will probably be unrecognisable in a few years time. And a significant number of people believe the change will not be an overall improvement.
    Imposing a requirement for dialogue may ensure that the change that occurs is meaningful, cost effective and achieves a better outcome for the majority of the population, and not merely for the few people that will be able to afford it.
    That, in my opinion, is the core change that is required in the new legislation.

  13. In the interests of clarifying a strategy for reform, a good place to start might well be to itemise just what the TSC perceives to be the FSA’s operational flaws. Once this has been done, each item can then be addressed one step at a time. For example:-

    1. Should the FSA be permitted to set its own budget without reference to any other body? Most reasonable people would consider that it should not.

    2. Should the FSA be permitted to pay bonuses without reference to any other body as to whether or not they’re actually justifiable in the light of what the FSA has actually achieved? No it should not.

    3. Why should the FSA enjoy statutory immunity from prosecution? No it should not. As things presently stand, the FSA can do more or less whatever it pleases with complete impunity.

    4. Should the FSA be allowed to allocate its self-set budget without reference to any other body in terms of whether or not it’s spending other peoples’ money in a prudent and cost-effective manner? I have in mind, of course, the vast sums blown on outside agencies commisioned to undertake research exercises, not to mention its complete licence to pay vast compensation packages to the likes of Clive Briault for “loss of office” due to dereliction of duty. How can that ever be right?

    5. Do all 3,000+ FSA employees need to be housed in some of the most expensive office premises in the land? Many would consider they most certainly do not and that very significant savings could be achieved by relocating three quarters of them well outside London.

    6. Should the FSA be free to set its own regulatory agenda without reference to any other body? I have in mind the creation of a regulatory oversight committee, i.e. a body to regulate the excesses of the regulator.

    7. And, of course, the FSA should be required to observe the provisions of the Statutory Code of Practice For Regulators, from which it appears to have granted itself a unilateral opt-out.

    The list goes on and on. If the TSC is dissatisfied with the present proposals for reform, then it needs to draw up and pursue a clear agenda of its own.

  14. Julian,
    you would make a good adviser to the TSC.
    The points you have made are the most annoying and unjust aspects of the fsa.
    Send them to Andrew Tyrie.

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