The new regulator should have the power to provide a full public account to Parliament following the failure of a firm, says Prudential Regulation Authority chief executive designate Hector Sants.
Speaking at last week’s launch of the PRA’s proposed approach to regulating banks, Sants said: “It is vitally important that the PRA has the ability to give a full public account to Parliament when firms fail. This process will be an essential component of the framework necessary to maintain trust in the organisation.
“The difficult question in a system where firms must be allowed to fail is, how should we define the circumstances when a report is produced? One possible approach would be to say that the reports would be merited where public money has been spent.”
Sants said he held this view “prior to the recent debate on the current FSA report on RBS”.
The FSA is currently emb-roiled in legal wrangling over a report into the collapse of Royal Bank of Scotland.
Senior politicians are calling for the FSA’s RBS report to be released but the regulator is unable to do so without the permission of those included in the report.
The PRA intends to publish some information included in firms’ regulatory returns to allow investors and other market participants to make their own judgements about the “safety and soundness” of a firm.
The joint FSA and Bank of England discussion paper, which was released at the launch, says the PRA will look to make as much information available as possible while being alert that disclosures could destabilise the market.
PRA deputy chief executive designate Andrew Bailey said: “One of our goals is to make sure the market can do its job and assess the safety and soundness of firms. We think an important part of that is the market having access to data it can use to compare and contrast firms over time.”