The future of the UK’s Financial Services Authority (FSA) will
be determined by the outcome of the country’s next general
election, which must be held on or before 3 June 2010.
Ousting of the incumbent Labour Party government would spell the
FSA’s death-knell following Conservative Party shadow Chancellor of
the Exchequer George Osborne’s announcement that abolition of the
FSA is a key part of his party’s plan to revamp the UK’s financial
services regulatory structure.
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“We will abolish the Financial Services Authority and the failed
tripartite system and give the Bank of England responsibility for
maintaining financial stability, and the tools to do it,” Osborne
declared in a speech.
The UK’s current tripartite regulatory system comprises the FSA,
the Bank of England and the Treasury and would be left intact under
Labour Party proposals.
Osborne continued: “We will give the Bank responsibility for the
prudential regulation of all of our banks, building societies, and
other significant financial institutions including insurance
companies.”
He added that under the Conservative Party’s proposals, the Bank of
England would have the power to regulate the pay structures,
riskiness, complexity and size of financial institutions.
“With the Bank of England in charge of prudential regulation, we
will also create a strong new consumer protection agency,” said
Osborne. “This will take responsibilities to protect the consumer
that are currently and confusingly divided between the FSA and
Office of Fair Trading, and place them in a single powerful body
able to stand up for consumers and ensure they are treated
fairly.”
The proposed agency will also have new powers to name and shame
institutions that break the rules or who receive a lot of consumer
complaints, Osborne said.
Coming out in the FSA’s defence, CEO Hector Sants emphasised, in a
speech delivered at the FSA’s recent annual public meeting, the
success he believes the regulatory body’s Supervisory Enhancement
Programme has achieved since its launch in April 2008.
“Our proactive approach to enforcement, complements our more
intrusive and intensive style of supervision,” said Sants.
“Since we set out this philosophy last year, we have demonstrated
by our actions that we will use all our powers, including criminal
prosecutions, to deliver our mandate.”
He noted that in its financial year to 31 March 2009 the FSA
imposed financial penalties totalling £27.4 million ($45 million),
up from £4.4 million in the 2007-08 financial year. In addition, a
record 58 individuals from the financial services industry were
prohibited for offences including market abuse and failing to
adhere to the FSA’s Treat Customers Fairly guidelines.
As at 31 March 2009, the FSA was responsible for regulating 27,340
companies, down from 28,325 a year earlier. During 2008-09 the FSA
increased its number of enforcement staff from 526 to 703.
