Standards & Guidance
Principles-based regulation will require investment
Firms regulated by the
Financial Services Authority (FSA) face a 9.5% increase in their fees in
order to fund the watchdog’s move to principles-based regulation.
John Tiner, FSA chief executive, said in order to achieve
this regulatory shift the regulator needs to invest in people and information
systems. Besides this, the FSA will concentrate on implementation of EU
regulation, financial education of consumers and addressing financial crime. New
initiatives are to be limited, but will include work on the impact of climate
change on financial services.
Stephen Haddrill,
Association of British Insurers director general, came out in favour of the
fee rises, arguing that the switch to a principles-based approach is good news
for customers and companies, but will alter the job of the regulator. As part of
this, he said, it has to be accepted that the FSA will need to invest in
training.
Lombard in the Financial Times
(7 February) suggested that for the FSA, principles-based regulation is
still a work in progress. The FSA is right to pioneer this approach, said
Lombard, but finding the appropriate people to carry it out will be difficult:
new managers will have to be human enough to agree when principles should take
precedence over rules, but be able to take a firm line when banks’ and brokers’
executives go too far.
Principles-based regulation involves ambiguity, and so
requires courage on the part of both the regulator and the industry, argued Ian
Morley, Dawney Day Brokers chief executive, in the FT. However, said Morley, the
FSA approach seems to lack this courage and the regulator may ultimately shift
back to rules in search of certainty. Furthermore, warned Morley, many people in
trade associations are themselves of a legal background, and prefer assurance to
uncertainty.
Links
Financial Services Authority
FSA Business Plan
Fees Consultation Paper
Association of British Insurers
March 2007 |
