‘Politically influenced FSA has lost industry’s respect’

The report, based on a survey of 150 financial services industry practitioners, says the FSA’s lack of accountability is creating growing disillusionment.

It says the FSA needs to address a number of concerns. Most significantly, the FSA is felt to be vulnerable to political influence and is appearing to be increasingly defensive.

The report says the regulator imposes prescriptive rules where a light-touch regime subject to broad principles would be more apt. It also says the FSA should become less dependent on the Treasury and more accountable to the industry it serves.

It claims the FSA needs to address the ever increasing cost of regulation and develop a culture of partnership with the industry and consumer groups rather than continue with its current bureaucratic approach.

CPS review team editor Tim Knox says: “The FSA should aim to be the world’s best regulator and to regulate the world’s cleanest, most competitive, most innovative and successful financial market. Nothing less will do.”

But FSA chief executive John Tiner says the FSA is a flourishing organisation.

He says: Where we have discretion, which is limited where we are required to implement European legislation, we intervene only where there is a market failure and where regulatory intervention is likely to be cost-effective.

“We take a risk-based approach which accepts that some failures neither can nor should be avoided. We strongly support the call for regulation to be based on principles rather than prescriptive rules.”