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FSA Turner-round

This morning’s press conference with Adair Turner lacked frantic media scrums, flashing camera bulbs and even hearty heckling from reporters about the FSA’s failings.

What it did feature was a very well-prepped and rehearsed chairman who was keen to convince us that his proposals will fix the banking sector while maintaining the attractiveness of London as a global financial centre.

In short, the FSA is calling for a fundamental change to bank capital and liquidity regulations, as well as bank published accounts. It wants to see more bank capital of a higher quality, with several times as much capital required to support risky trading activity.

Echoing Hector Sants’ comments last week, Turner highlighted the need for reporting relationships to exist between companies’ risk management departments and their non-executive directors.

Although the FSA probably won’t admit it, this is likely to be a response to the HBOS scandal where former head of group regulatory risk Paul Moore claims he was fired for expressing concern about the firm’s risk-taking to executives.

Moore also questioned the appointment of sales manager Jo Dawson as his replacement, despite the fact she had absolutely no experience, training or qualifications in risk management or compliance.

Surprise surprise, Turner also emphasised the need for more banking staff with relevant skills and qualifications.

He said: “We will make sure a focus on core banking skills is there. We will be asking more questions about staff, particularly in risk management functions.”

This to me is a good idea and one that seems fairly obvious. I don’t know many highly skilled, complex jobs that require no formal, relevant qualifications.

We’ve all been bombarded today by news coverage of the Turner Review and the implications it will have for banks. But what will the flow-on effect for intermediaries be?

The answer is we don’t know yet, but as more detailed proposals emerge from the FSA the picture should become clearer.

Aifa director general Chris Cummings says advisers will undoubtedly be affected by the changes.

He says: “This might not be targeted at IFAs but that doesn’t mean they won’t be affected by it. The new regulation will mean that banks and financial institutions have to resculpt the products that advisers sell so there will be some consequences.

“What the review says to me is that the FSA is now accepting the fact that its role will change, especially as it’s supporting the creation of an EU regulator. The FSA is looking at the long-term position of its own organisation. What we need to consider is what structure of regulation will benefit our members.”

As is always the case the devil will be in the detail. Let’s hope the detail won’t make life even harder for a market that already has a lot on its plate.

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