FSA chief executive Hector Sants says the regulator will spend less time on the routine supervision of smaller firms to concentrate on the transition to the new regulatory structure.
Speaking this morning at the Thomson Reuters offices in Canary Wharf, Sants (pictured) said because the FSA has to both design the new regulatory approach and manage the transition, the regulator’s resources are “undoubtedly stretched”.
He said as the majority of staff’s time is spent on frontline supervision, the regulator needed to reprioritise its efforts to oversee what is a complicated transition process.
Sants said: “We will thus be taking a bottom-up and risk-based approach to scaling back some of our supervisory activities. Nevertheless, although this will be a risk-based approach, we will inevitably be decreasing the amount of time spent on pre-emptive, routine supervision for lower impact firms.”
He added although new risks may be created in the long-term, the move to the Prudential Regulation Authority and the Consumer Protection and Markets Authority meant that change to the regulator’s approach was inevitable.
He said: “There will be some modest diminution in respect of our on the ground inspection of smaller, low impact firms. Inevitably that potentially has an impact in the future on the emergence of new risks in the system. But I think we are trying to do it in as proportionate way as possible.
“We have a high amount of staff, and the reorganisation is a major challenge which clearly needs to be delivered on time in as cost effective a way as possible. Some modest alteration of our risk profile is an inevitable consequence of that programme.”