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Speaking to industry leaders, the managing director of the FSA’s prudential business unit and executive director of the Bank of England said the PRA would not be a “zero failure regime” but one where firms can be allowed to fail in an orderly way without major detriment to the wider system.
He said: “Our approach will be based on setting clear and concise standards for all PRA regulated firms. The PRA’s approach will be clearly judgement-based rather than focussing on narrow rules, and it will be forward-looking, taking into account a range of possible risks to our objectives and the stability of firms.”
His comments followed the publication of a document setting out the PRA’s approach to regulation and that of the new Financial Conduct Authority.
Hugh Savill, director of prudential regulation for the Association of British Insurers, said: “The new judgement-based approach has to be grounded in a deep understanding of the industries that it will supervise. It is now imperative that the PRA build up its understanding of insurance at senior levels within the organisation.”
Adrian Pickersgill, director of West Midlands-based Chatfield Private Client, said: “I agree with what is trying to be done, but since 1988 we’ve been through so many different regulators with different roles and every single one has been merged, shut down or criticised.
“The problem is regulators will never be able to regulate an industry so fast and dynamic on its feet. The only thing it can do is clamp down on it so hard and tight that it ends up strangling the financial economy.
“Where there is money, there is greed and corruption. People either operate ethically or they don’t, and regulation won’t change that.”