View more on these topics

FSA heralds ‘revolutionary approach’ to banking regulation

The heads of the FSA have promised MPs that banking regulation is set to change “fundamentally” in the wake of the current banking crisis.

Giving evidence to the Treasury Select Committee this afternoon, FSA chief executive Hector Sants and chairman Lord Adair Turner both blamed the “political philosophy” of past regulation for missing the problems in the part and fully nationalised banks.

Turner said: “We had a philosophy of how we did regulation, that focused on organisation structure, processes, systems – it fairly overtly said it wasn’t the function of the regulator to cast questions over the overall business strategy of the institution. With hindsight I find it surprising, but it’s the case.

“That existed in a political philosophy where all the pressure on the FSA was not to ‘are you looking these business models’ but to say ‘why are you being so heavy and intrusive, can’t you make the regulation light touch?’”

But both men assured members that the FSA recognises these faults and is changing the way it regulates.

Turner said: “It is going to be fit for purpose; it’s a revolutionary approach. It is a long way through necessary changes. Both us and the Bank of England should have a significant and formal role in macro-prudential analysis.”

Sants agreed, he said: “I do believe for the last 12 months we have put in place significant changes to our supervisory processes; we look at the business, we look at the risk and we look at the future of the banks – we are a fundamentally different organisation that we were 12 to 18 months ago.”

Turner admitted that he would have made the same regulatory mistakes as his predecessors, but doubted that the FSA would have had the power to change anything.

He said: “The FSA should have been more involved in sector analysis. But I think if the FSA had come out in 2004 and had begun to aggressively tell mortgage banks to cut lending, the predominant reaction for many people would have been to tell us not to hold back mortgage credit to ordinary people and that we were preventing the democratisation of home ownership.”

Recommended

Broker Talkback

Should the FSA change its RDR proposals to allow factoring, whereby providers can pay an up-front sum to advisers that is deducted from the product over time?

Yes 50%
No 50%

King keen on ‘bad bank’

Bank of England governor Mervyn King says he is keen to create a national ‘bad bank’ to clean up the balance sheets of the troubled UK lenders.

Europe 2017: Value, large-caps & liquidity

Joshua Ausden, Head of Client Investment Strategy, Neptune Read more here Important Information – for Investment Professionals Only. Not for Retail Clients.Investment risksNeptune funds may have a high volatility rating and past performance and forecasts are not a guide to future performance. These are Neptune’s views and as such this document is deemed to be […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com