The chief executive of the Financial Services Authority (FSA) has hit out at the banking industry for not “practising what they preach”.
Hector Sants, the FSA head, claims that the banks have not learned their lesson from the fallout of the worldwide financial crisis. He spoke whilst delivering a speech at the Chartered Institute of Securities and Investments, stating that there is “clearly a gap between what they (major institutions) claim to believe and do and what they actually do. Worryingly, even after all the supposed lessons learnt we are still seeing some decisions by management in major firms that we would judge not to be prudent”.
The new Coalition Government have announced a re-jig of the FSA, initially it was thought that Mr Sants was going to leave the regulators completely, however it is now understood that he will instead oversee the transfer of the FSA’s powers over to the Bank of England, in line with the Governments new finance plans. The new system will be known as the Prudential Regulator, it will operate as a bank subsidiary and will establish set rules for lenders individually.
Mr Sants added that: “It is, I believe, our role to police behaviour and ensure firms have the right culture, which facilitates the delivery of the outcomes we expect”. New Chancellor George Osborne has initiated the biggest changes to the regulation of UK markets since 1997. Work will be done to ensure that firms will now hire managers of strong integrity, and to regulate firms with an eye to the broad social picture, not only shareholder returns.
However some people are wary as to whether making such grand changes is wise when the cloud of further economic unrest still looms. A lawyer at CMS Cameron McKenna, Ash Saluja told The Telegraph: “We are entering an extended period of confusion and can only hope that the feared second wave financial crisis doesn't catch us with our regulatory pants down”.