FSA departures make breaking up hard to do
It is not good business sense to lose experience, knowledge and skill sets accumulated over more than a decade.
On 2 April this year, the FSA implemented the next major milestone in the so-called ‘twin peaks’ regulation by splitting supervision of dual regulated firms between the Conduct Unit and the Prudential Unit.
These two units will operate more independently within the umbrella of the FSA during the run up to actual legal separation next year.
The FCA’s proposed statutory objectives have gone through some changes following parliamentary discussion and now the FCA has the single strategic objective which is “making markets work well” and the three operational objectives are to ensure consumer protection, market integrity and competition in the interests of consumers. The FCA is intending to look and feel different from the FSA, with a view to be “a judgement based, bold and pre-emptive regulator that acts to ensure consumers get a better deal and markets are fair and orderly”.
In April, the FSA’s director of supervision, conduct business unit, gave a speech touching on this approach, emphasising five main elements: (1) to be more forward-looking in assessment of potential problems, (2) intervene earlier when it sees problems, (3) address the underlying causes of problems that it sees, not just the symptoms, (4) secure redress for consumers if failures do occur and (5) take meaningful action against firms that fail to meet the requisite standards, through fines that have a credible deterrence.
Not surprisingly, the FSA/FCA will be upping their communication around what the FCA will be and how it will operate “as part of a more transparent approach to both firms and consumers”.
Nevertheless, the introduction of dual regulation for some firms will create significant challenges, especially when dealing with two independent supervisory teams.
The introduction of this new structure is made no easier by the fact that the core of regulatory knowledge is bleeding away
The introduction of this new structure of regulation will take some getting used to and the transition is made no easier by the fact that many in the FSA have left or are leaving and the core of regulatory knowledge is bleeding away.
Whatever the view taken of the FSA’s performance, it is not good business sense to lose experience, knowledge and skill sets accumulated over more than a decade.
Philip Ryley is head of financial services and markets at Michelmores LLP