Sants: New regulator to get stronger powers over the banks

FSA chief executive Hector Sants says the Prudential Regulation Authority will be given new powers to withhold future bonus and dividend payments by UK banks and should be allowed to make public its investigations into banking failures.

In an interview with the Financial Times, ahead of a conference in London today setting out the future role of the PRA, Sants says the new prudential regulator will have powers to withold bonuses and dividends if it believes they will undermine the institutions’ capital adequacy and risk management.

Sants. who will become head of the PRA when the FSA is split into two next year, said the new authority would need investigative powers to avoid a repeat of the recent failure to make public the FSA’s report into RBS.

Sants said: ‘When a bank failure does occur, based on some trigger, maybe the commitment of public money, it would be appropriate that the PRA does deliver a report…We want to move away from the difficult situation in which the FSA found itself with RBS.’

‘We are extremely keen to get real clarity from stakeholders about what the PRA should and should not be doing,’ he added.

He also wants to require banks to make public detailed information on their holdings – data that is currently only seen by the regulator.

Earlier this month the Treasury select committee announced Sir David Walker and Bill Knight are to review the FSA’s report into the collapse of Royal Bank of Scotland.

The report was originally expected in March but has been delayed due to legal wrangling between the bank’s lawyers and the regulator over the tone and the content of the report.