FSA chief executive Hector Sants is to remain at the regulator to oversee its transition into a new prudential authority which will be a subsidiary of the Bank of England.
Sants, who was expected to leave the FSA this Summer, will also become a deputy governor of the Bank of England and the first chief executive of the new prudential authority as the FSA is replaced in 2012.
The fundamental shift in UK financial services regulation, announced last night in Chancellor George Osborne’s Mansion House speech, will also see the creation of a new Consumer Protection and Markets Authority to regulate all authorised firms.
The sweeping changes give huge extra powers to Bank of England governor Mervyn King who will also be responsible for a new Financial Policy Committee which will have the power to address macro issues that threaten financial stability.
King says: “We shall aim to avoid an overly legalistic culture with its associated compliance-driven style of regulation. That is an important reason for the separation of consumer protection and market conduct from prudential regulation. We must reverse the seemingly inexorable trend towards more regulation and more regulators. That did not work in the past and is not the right response now.”
FSA chairman Lord Turner says: “In particular I am delighted that Hector, who has done so much to transform the FSA during the past few years, has agreed to lead the transition to the new structure in 2012, and to become the first chief executive of the prudential authority and a deputy governor of the Bank of England.
“The crisis demonstrated the need for new regulatory approaches and more intense supervision, and the FSA has already implemented major change. But it also demonstrated the need to bridge the gap between macro-prudential policy and the supervision of individual firms. The Chancellor’s proposals for prudential regulation will enable us to do that, while building on the major changes we have made over the last few years. The timescale will enable us to manage the transition in a smooth and orderly way. “
Lord Turner says there are a number of important issues still to be resolved, particularly around arrangements for enforcement and markets activities. He says: “We look forward to working closely with the Government in considering the relative merits of different possible arrangements for these.”
Lord Turner told BBC Radio 4 this morning that he would be leaving after 2012, although he has been tipped as a future successor to King.