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FSA: Give MPs more scrutiny powers over regulators

Andrew Bailey BBA Conference 2012 480

FSA head of prudential business unit Andrew Bailey is calling for the Treasury select committee to have much greater powers of scrutiny over the Financial Conduct Authority and Prudential Regulation Authority.

Giving evidence to the Parliamentary Commission on Banking Standards yesterday, Bailey said he wants an amendment made to the Financial Services Bill to hugely strengthen the power of the TSC by allowing it to force the FCA to conduct reviews and hand over information.

He said: “There needs to be greater transparency of the judgements we make and the decisions we make than is currently being provided.

“It is important for regulators because a judgemental structure of supervision which emphasises the big issues and makes the appropriate judgements on them must be matched by proper transparency and accountability otherwise it will not work.

“If not then the legitimacy of what we do will inevitably be called into question. Our standing would be undermined and we would get ourselves back into trouble.”

Bailey highlighted the TSC scrutiny of Barclays’ role in the Libor scandal in July as a possible example of regulator scrutiny, although he described it as unsustainable model.

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Comments

There are 7 comments at the moment, we would love to hear your opinion too.

  1. Ha! The FSA say this now that they only have days left themselves!

  2. At least two things concern me about the statements,
    1) It seems like the tail is wagging the dog. Why is it that the FSA a non elected organisation give mps more scrutiny powers.
    2) This sounds like a severe case of sloping shoulders, When something goes wrong infuture why didn’t the treasury pick it up when they scrutinised the goings on.
    p.s “It is important for regulators because a judgemental structure of supervision which emphasises the big issues and makes the appropriate judgements on them must be matched by proper transparency and accountability otherwise it will not work.

    Why has it taken until now for them to state the obvious, its too late.

  3. I would be more impressed if the FSA had in the past conducted its tasks under the requirements laid down in the Regulators Compliance Code, which states in part 2 of thecode, para 3.1 “Regulators should consider the impact that their regulatory interventions may have on economic progress, including through consideration of the costs, effectiveness adn perceptions of fariness of regulation. They should only adopt a particular approach if the benefits justify the costs and it entails the minimum burden compatible with achieving their objectives”

    Para 3.3 goes on to state Regulators should consider the impact that their regulatory interventions may have on small regulated entities, using reqasonable endeavours to ensure that the burdens of their interventions fall fairly and proportionately, by giving consideration to the size of teh regulated entities and the nature of their activities”

    Para 4.3 further states – In evalutating the likelihood of non compliance, regulators should give consideration to relevant factors, including, past compliance records and potential future risks, existences of good systems for managing risks, in particular within regulated entities or sites, evidence of recognised external accreditation and managment competence and willingness to comply.

    SO the upshot of this is that when the FSA state there will a zero tolerance to allowing advisers to continue advising clients post 2012 whohave not achieved level 4, is the regulator acting within the code of practice and is their impostion of retrospective exam requirements for existing practitioners who have an impeccable record but are not very good at exams, legal ?

    Answers within the blog please.

    I raised some of these issues to the FSA recently and was contacted by one David Kearney from the FSA who discussed my well expressed concerns that the regulator in imposing retrospective exam requirements on existing practitioners was in fact a deliberate and callous act of inhuman conduct in breach of the age discrimination requirements under the equality act.

    No answer in writing yet, but he did say I had expressed myself well.

    Oh well, a compliment is a compliment and shouldn’t be down played (Lol if you like )

  4. Sorry, I missed one point. I thought the regulator was answerable to parliament ?

    Judging by their response the reasonable requests from the TSC to put back implementing RDR by 12 months, it would seem not!

  5. Well said Mr Andrew Bailey. I could not agree with you more. The FSA’s Stasi model is entirely corrupt and rather than encouraging engagement to help improve the quality of regulation, it achieves the opposite.
    Look no further that the recent CP12-19 as a perfect example of muddle-headed drivel and an excuse for a lack of effective action and integrity on behalf of the FSA. The unintended consequences of which, if implemented, would kill Government policies (hard won from Europe on certain attributes) to encourage regeneration and job creation where funding vehicles require LP’s, LLP’s and Ltd Company SPV’s to take advantage of reliefs for investors. The FSA has the power to usurp Government policies.
    It really is about time regulation had transparency and accountability. Of course it should be accountable to our elected officials. I am sure the spectacular failures of regulation that it has overseen could have been avoided. The ‘we know better’ brand is way past its sell by date.

  6. Sounds like a politically-inspired statement of ‘mea culpa’ by Mr Bailey.

    However, I do agree with him and would provide the following (purely academic) example:

    The FSA authorises a low risk fund that consequently turns out to be high risk and in flagrant breach of its investment powers. Furthermore, the ACD failed to control its appointed fund manager and published grossly incorrect fund prices that led IFAs and clients to believe that the fund was performed much better than in truth. The fund even won an award for its performance!

    So what does the FSA do? Does it:

    A. Promptly investigate the background to the matter and publish a full, transparent report; accepting that mistakes were made in authorising the fund and requiring the ACD and fund managers to fully compensate investors for their loss.

    or

    B. Do all in its power to avoid any personal responsibility and delay publication of its report; while agreeing a no-fault Payment Scheme for a fraction of the loss with the ACD; and requiring the financial advisers to pay over double the amount paid by the ACD. It also restricts investors rights of complaint and ties the ‘independent’ ombudsman’s hands.

    Of course, any resembalance to the Arch cru fiasco is wholly co-incidental ………

  7. It sounds to me as if what he’s calling for is an Independent Regulatory Oversight Committee with the unassailable authority to say to the regulator, when appropriate, This is wrong (not least because it’s totally at odds with the Statutory Code of Practice for Regulators) and you aren’t going to do it. So scrap it or go away and rethink it (without pissing away another million quid of OPM on yet another outside feasability study).

    I don’t for a moment question the need for the FS industry to be regulated but clearly any regulator must be properly accountable and, when necessary, forced to abide by an appropriate system of checks and balances.

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