By Simon Miller
Financial Services Authority’s (FSA) chief executive Hector Sants has praised the regulator’s actions in the financial crisis in the face of “relentless criticism”.
In the final FSA annual report before its regulatory role is split between the Prudential Regulation Authority and the Financial Conduct Authority, Sants gave a robust defence of its response to the financial crisis.
He wrote: “During the financial crisis, as I have said publicly, we gave our utmost and I do believe that in the circumstances there is nothing more the FSA could have done which would have materially changed the outcome. I also believe that without our actions it would have been worse. Furthermore, against this backdrop, to have delivered on the regulatory reform agenda is a significant achievement.”
Sants added: “Above all, what I am most proud of is not what the FSA has achieved, nor how bad it would have been if we did not take the actions we did, but the way we have responded to how we go about regulation, our willingness to learn, and change in the face of difficult conditions and what has at times felt like relentless criticism.”
The FSA’s chairman Adair Turner acknowledged that in the case of payment protection insurance (PPI) mis-selling, the FSA was ineffective.
With a latest estimate of around £3.5bn in compensation, Turner said it suggested that PPI was another chapter in the sustained litany of mis-selling scandals, which have eroded customer trust in UK retail financial services.
He added: “They also illustrate, however, the ineffectiveness of the FSA’s past approach to conduct regulation, which failed to intervene early enough, or far enough up the product development and marketing chain, to address problems before they produced major customer detriment.”
Turner said the regulator was reforming its approach to conduct supervision “as radically on the prudential side, and the processes, skills and resources of the FCA are being designed to ensure a more effective approach in future”.
He continued: “A new more effective supervisory approach to ‘early intervention’ will always need to be supported, however, by the credible deterrence of potential enforcement action, and in this area too, the future authorities will build on major changes in the FSA’s approach, implemented over the last five years.”