In the Turner review, published today, the FSA has also unveiled more details of this new intrusive style of regulation.
This includes a significant increase in the resources devoted to the supervision of high impact firms and in particular complex banks.
There will be an increase in the frequency of Arrow visits from a maximum of every three years to a maximum of every two years.
The report says there will be a shift in supervisory style leading to a greater willingness to vary capital and liquidity requirements or to intervene
more directly if the regulator perceives undue risk.
There will also be greater focus on remuneration policies, and the integration of oversight of remuneration policies into overall assessments of risk.
The report reads: “There is also a strong case for bank regulators such as the FSA to be far more involved than in the past in the review and comparison of accounting approaches to fair value estimates and loan impairment provisions. Over the last six months the FSA has been intensively involved in the analysis of bank balance sheets to inform decisions on bank recapitalisations and the Asset Protection Scheme.
“This analysis has revealed significant differences in the marks used by different banks to value similar trading book assets and significant differences in the allocation of assets between trading and banking books.The FSA has not in the past monitored these accounting policies as closely as now seems appropriate.”