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PRA chief Andrew Bailey hits out at lack of FSA accountability


Prudential Regulation Authority chief executive Andrew Bailey has hit out out at the former FSA regime, claiming the regulator failed because it lacked accountability and clear objectives.

Speaking at a Lansons Communications Future of Financial Services conference in London today, Bailey said the new regulators must be more directly accountable to parliament.

He said: “The challenge we have is in getting a clear public policy objective to stick. The only way we can do that successfully is that we have very clear objectives from parliament and we have very clear accountability to parliament. I think the system that was put in place in 1997, the FSA, did not succeed in that respect and did not have clear objectives.

“In a sense the conclusion is it had too many objectives and it did not have a clear line of accountability to parliament. If you do not have those things in place then you are far more at risk of failing than if you do. That is the real lesson in terms of what worked post-1997 and what did not.”



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There are 15 comments at the moment, we would love to hear your opinion too.

  1. If he added that it lacked compassion, foresight and an awareness of adviser-client relationships I’d say he pretty much nailed it.

  2. Fantastic, put him in charge of the FCA as well just in case they are still employing some left over muppets.

  3. Scott Taylor-Barr 17th April 2013 at 12:32 pm

    Nice to hear – would be great if we saw this in practice, I hope we do from both our new regulators.

    As regards the FSA; they did have 4 statutory objectives from the Financial Services and Markets Act (2000) – however rather than stick to those and be guided by them it did appear to very much “do its own thing”.

    Looking back on those 4 objectives now, with the benefit of hindsight, it’s almost amusing at how far from achieving them it actually was when all said and done – especially as number 2 was “financial stability”!

  4. Very brave after the event aren’t they.

    The proof of the pudding is yet to be seen as the FCA can and will be judged by it’s actions not words.

    But Hang on a minute who will judge them as the FCA are not accountable to anyone either. Drat thought we had progress for a minute.

  5. He must be on something !

  6. WOW. A regulator who talks common sense. Of course there should be oversight of a regulatory body, it is so obvious that it is astonishing that it was not thought of when the FSA was set up. Power corrupts, Power without accountability corrupts completely, and then leads to a highly paid position with an organisation which has been one of the worst offenders against the nominal oversight. Shades of a corrupt South American county.

  7. Derek Bradley ceo Panacea Adviser 17th April 2013 at 12:52 pm

    Encouraging words but it could have been very helpful for the industry to have seen this message transmitted a few years ago by Mr Bailey.

    He should also remember the words of Lord Turner wio told the TSC that if the FSA were to be made accountable, nobody would want to work for them, or words to that effect.

    In the case of the FSA it was an organisation that had some brilliant minds and did some good work that may not often be appreciated.

    But perhaps the complications and complexities of regulation and the burden it places on firms large and small was and is caused by the fact that too much time is spent on the complex formation of rules, processes and reporting to emphasize or justify a regulators own importance, existence and intelligence and not enough on listening and using plain common sense.

    We hope that Mr Wheatley ploughs a different path.

  8. …and they still gave Hector a knighthood!

  9. OMG! Someone has actually admitted that the FSA failed!!!!!

    Lord knows what Sants would have got if they had been a success…..

    I personally believe that some of the failures constituted criminal negligence and it is VERY sad that the lack of accountability protects them.

  10. Well the more one hears fom the new Regulators the more opne can take heart. AS others have said, we still have yet to se the words translated into actions, but you can’t deny this is a vey good start in just 17 Days.

    As Derek points out one does wonder why Dr Bailey didnd’t say anyting at all while he was at the BoE all those years. Anyway he’s said it now – heres hoping he sticks to it.

  11. Since 1st January, when seeing clients explaining the new charging structures and rules I have also explained that the architect of the debacle unfolding that is RDR left the FSA six months before introduction, but took those six months as ‘gardening leave’ taking £400,000 of consumer money as unearned salary, a £60,000 pension contribution but he threw in a sweetener by giving his bonus to charity(ies), although of his choice. And then on 1st January 2013 he took up a very lucrative role with Barclays Bank, one of the institutions that he failed to regulate properly, under the pseudonym of ‘Sir’ Hector Sants.

    Hasten to say, they are all delighted for him but also added that had I decided to take a six month break from my job as their adviser, whilst still taking an income from them, then they would certainly have sacked me and complained at the same time. Double standards I feel. I also threw into the mix that if they had the hump about Hector’s actions then they ought to complain to their MP. Now hopefully, Martin Wheatley may just recognise the ludicrousness of the disaster that awaits the industry as a result of the RDR. In the meantime I am having to reduce my time with clients due to the additional workload of extra reporting on fees (just to provide the FCA with proof that commission is dead and everybody is paying by fees) along with a load of unintended consequences such as the recent HMRC ruling on rebates.

  12. Blah Blah Blah Blah Blah !!!!

    I dont know which bone to chew first, I keep getting thrown so many these past few days from the new regulators

    Less of the words please Mr Bailey more action is required.

    Give your mate at the FCA a nudge and get him to scrap MAS and the bloody awful RMAR for a start oh and a bit cost cutting would be most welcome, and finally two new front teeth from all the bone chewing or better still some bread and butter

  13. Yes, Mr Bailey, some of us noticed this and actually spoke out at the time.

    Coming soon-more shock horror revelations-his holiness rumoured to be catholic etc etc

  14. Quote-:
    “I think the system that was put in place in 1997, the FSA, did not succeed in that respect and did not have clear objectives”.

    I beg to differ they did have some very clear objectives !!! namely how to secure the next big paying job, I wait with baited breath to hear where Sheila Nicoll will end up when she goes this month (any news on this MM)

  15. I agree wholeheartedly with Mr Bailey. He actually seems like a pretty good, straight-talking guy.

    The foundation for any new framework of accountability on the part of the FSA’s successor body must be an Independent Regulatory Oversight Commitee, created by Parliament. The central remit of this new Committee must be to hold the FCA to both the spirit and the letter of the Statutory Code of Practice For Regulators.

    Any handy exemption from the Code that the FCA may assume itself to have inherited from the FSA should be removed.

    To remind you all of what the Code states:-

    Its aim is to embed a risk-based, proportionate and targeted approach to regulatory inspection and enforcement among the regulators it applies to.

    Our [the government’s] expectation is that as regulators integrate the Code’s standards into their regulatory culture and processes, they will become more efficient and effective in their work. They will be able to use their resources in a way that gets the most value out of the effort that they make, whilst delivering significant benefits to low risk and compliant businesses through better-focused inspection activity, increased use of advice for businesses, and lower compliance costs.

    Elsewhere, Martin Wheatley has said that a regulatory structure that removed all risk would be prohibitively expensive ~ which is obvious, hence the need for any regulator to allocate its resources proportionately according to the areas of highest perceived risk. As all the data proves, the IFA sector, though not perfect. presents the lowest level of regulatory risk.

    There can be no justification for allowing the FCA to retain the same exemption from the Code as enjoyed by the FSA. As we all know, the FSA flagrantly abused the privilege, with disastrous results.

    If Martin Wheatley is genuinely committed to true accountability, he will surely support such moves.

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