View Full Version : Is this the end of "principles based" regulation?

12th March 2009, 22:13
To most this story will sound a bit like shutting the stable door after the horse has bolted, but to others it may sound like some sanity is being restored.

'Be afraid' warns regulator Sants (http://news.bbc.co.uk/1/hi/business/7939619.stm) (SFW)

Intensive supervision

Speaking to an audience in London, Mr Sants said that to stop a "similar crisis" in banking happening again, the supervision of banks would have to become more "intensive".

He said the FSA would take action if it thought the judgements of senior managers in financial institutions were too risky, even if it carried the risk of stifling innovation.

With the sweeping away of the old regulatory infrastructure and replacement by the Finacial Services Authority - FSA (which was Gordon Brown's work by the way), the new regulator sought to move away from the old-fashioned "here are a load of rules that you must follow" approach, to a new-fangled "we are not going to tell you what you can and can't do, but here are some guiding thoughts and everything you do must not break those principles" one. One of the main reasons for doing this was the belief that proscriptive rules stifled innovation and therefore threaten the City's position as a leading financial centre.

My compliance friends have been moaning about this new approach for some years now, saying "why can't they just tell us what the freaking rules are and we'll make sure that they are followed" while they tear their hair out.

Are we going back the 1990s when there was some stability, and is it about time too?

12th March 2009, 22:18
Until you hear people talking about returning to the days where retail/high street banks stayed as retail/high street banks and don't indulge in the more riskier of banking and investment activity, it is merely like rearranging the deckchairs on the Titanic.

I see no signs of the real systemic problems being addressed because banking is far too interlinked with the main political parties.

The danger is, we will come through this (eventually), but nothing will really change, so next time it will be even worse.