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Should Govt back Hector Sants’ plan to strip FCA of fining powers?


Proposals from former FSA chief executive Hector Sants to strip the power to set fines away from the regulator have been given a cool reception by the industry.

Sants made the suggestion as part of a report commissioned by the British Bankers Association last week.

Now working for consultancy Oliver Wyman, he argued the Government should consider establishing “a new independent body responsible for penalty and redress decision-making” outside the FCA.

Sants also suggests policymakers examine the case for increasing operational separation of the FCA’s supervision and enforcement divisions.

The report says: “The current remit of regulators covers supervision, penalty and redress.

“This can distort incentives and create the potential for regulatory moral hazard and political influence.

“Many contributors believed that an independent body responsible for redress would result in better outcomes, not only for banks but also for their customers in ensuring rigorous alignment alignment of redress amounts with the cost of the misdeed.”

The report also warns the existing rules “place a disproportionately large burden on smaller banks that are less able to absorb the cost of the increasing complexity of the regulatory environment”.

Garry Heath, founder of adviser group Libertatem, says Sants’ proposal to take the ability to set fines away from the FCA is right “but for the wrong reasons”.

He says: “A lot of people right at the top of regulators have come into it having been at one of the big banks, and why shouldn’t they?

“But it does give off the feeling that if you are a larger player then you might be protected because a subset of your ex-colleagues are running the regulator.”

Threesixty managing director Phil Young argues that it remains unclear why the creation of a new body would prevent “political influence” affecting the FCA.

He says: “Given there’s been some concern about the FCA’s own independence and there’s speculation about whether the regulator will be under pressure to go soft on the banks, it could be that the Government have too much of an influence over the FCA’s policy.

“But Sants’ solution would just put the problem somewhere else, rather than fixing it.

“It just begs the question of why wasn’t it done when he was in charge of the regulator? And do we really need another Quango?”

Adviser view

Duncan Carter, managing director, Clearwater Financial Planning

The FCA does what it wants and is fairly unaccountable, and the fines are just part of that.

So those fines and the ability to raise them needs to be subject to greater scrutiny and more accountability.

Any fines levied should be used to reduce the burden on regulated firms as opposed to going into the Treasury’s consolidated fund.



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There are 2 comments at the moment, we would love to hear your opinion too.

  1. I should think he knows what has being going on in the past and so does the government, this report is their way of trying to get out of the hole they dug for themselves.

    The other sore points are the FOS and the FSCS.

    Oh and the 15 long stop, it hasn’t been repealed so how can a regulator override it? The FSA told me it couldn’t.

  2. Trevor Harrington 18th November 2015 at 5:30 pm

    Why are we even discussing … “should the Govt back Hector Sants” ?

    He has had his Knighthood, although for the life of me, I have absolutely no idea why?

    Is it not the case that this man is a complete and utter disgrace?

    Did he not preside over a strategy (RDR) which resulted in 25% of the Adviser community leaving the profession, and now they ask why we cannot properly advise the lesser worth client?

    Did he not leave the regulator through the “revolving door” in order to work for Barclays Bank …. and then promptly declare himself too ill to work …. and presumably eligible for early retirement benefits?

    If I was a Barclays Pension Fund Trustee, I would be looking very carefully indeed at that little routine, and the people involved, and I would be asking precisely how much it cost the fund for what was about six months work (work?).

    I do not know what this man has, apart from an obviously charmed life and presumably some extraordinary “connections”, but everything around his employments, past and present is beginning to smell a bit, to say the very least.

    I certainly do not think we should be considering any opinion that he may hold, and his track record seems to verify that opinion in large capital letters.

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