No return to light touch regulation, says Sants

There will be no return to ‘light touch’ regulation, FSA chief Hector Sants said yesterday.

He was speaking at the annual public meeting of the FSA, held in central London.

In his address, Sants discussed the proposed regulatory changes announced by the Chancellor of the Exchequer in his Mansion House speech on June 16.

He said: “The new structure will create separate organisations to address conduct and prudential risk. We will thus need to ensure that these new organisations carry forward both the philosophy of ‘outcomes based regulation’ but also the necessary mechanism for making the required judgements.
 
“As I have said in the past, the key issue is ensuring we have the right quality of people, the right culture and the right regulatory philosophy. Achieving these goals will be a challenge, particularly since we are likely to be making these changes against the backdrop of a continued fragile marketplace. However, I am confident we will succeed.
 
“We will take forward all our major policy initiatives within the new structure. We will not be deflected from delivering much-needed policy reforms such as the Retail Distribution Review. 

“Furthermore, firms should recognise that our intensive supervisory approach will continue into the new organisational framework.”

He went on: “No doubt as we move out of this crisis there will be calls for regulators to revert to light touch regulation, and senior management will be less willing to listen to a regulator who could be seen to be ‘second guessing’ management.  

“When this happens it is vitally important that regulators stand their ground and continue to be proactive, but this will require that they are supported by government and society as a whole.”