FSA CEO Hector Sants has hit back at criticism of the regulator's staff as being ‘out of touch' in his keynote speech to the FSA Annual Public Meeting.
He says the FSA is working towards getting the right mix of career regulators and experienced market practitioners, built on a vibrant graduate programme.
“I believe we have achieved much this year towards this goal. Especially pleasing has been the depth and experience of many of those we have hired from the industry.”
“Of course, there is always more to do. But I would like to dispel, I hope once and for all, the view of some commentators that the FSA is staffed by out of touch bureaucrats.
“Anyone who meets my colleagues, or even looks at our website, would realise that this is simply not the case. We have an excellent balance of market and regulatory experience within our senior team and at all levels of the organisation.”
He says this year the FSA has also moved closer to the kind of culture it is targeting which attracts and retains quality individuals and encourages decisive yet considered judgements.
“In particular, I believe we have demonstrated our willingness to be brave and to make difficult, directive judgements – even when we know we will be criticised by vested interests.The most recent example of this was over short selling,” Sants says.
Sants also told delegates the biggest lesson the FSA has learnt this year is over its ‘unacceptable’ standard of supervision of Northern Rock.
He said the last year has been difficult for the regulator and perhaps the most challenging since its creation ten years ago.
“You should be in no doubt we regret the events surrounding Northern Rock. But respected and durable institutions grow stronger in times of adversity.
"In the last twelve months we believe we have both achieved much and learnt much. And I have no doubt that the FSA is now a stronger organisation as a result of the hardships of the last year,” he said.
The FSA has already announced the introduction of its new Supervisory Enhancement Programme by the end of the year, which includes a commitment to have a minimum supervisory resource for all high impact firms.
However, this plan will lead to increased costs and the FSA is likely to exceed the levels of expenditure shown in the Business Plan for 2008/09 which will also have consequences for next year, Sants says.
“ I do, however, believe that this necessary investment is supported by the firms who will benefit from the resultant higher quality supervision.”
Sants says it is also likely that levies will increase for the 2009/10 financial year, but would not comment on which groups would face increased levies.
"We'll have to wait and see if the FSA wants to increase fees for intermediaries or the banking sector," says Phil Castle from Financial Escape.
"However, it is ironic that the FSA and FSCP want to increase fees and their own salaries at a time when firms are already struggling to maintain their profits in the current economic environment."
Sants also outlined the challenges for the market for the year ahead and reiterated his view that the era of ‘easy money’ has gone.
“We have seen several acts playing out in the markets. The first act, last summer, was a liquidity crisis. In the autumn we moved into the second act where the concern has been about capital. We are now anticipating the third act, which is likely to feature a downturn in the real economy.
“The good news is that we are moving through the acts. But the risks in each are material and neither we nor our firms can afford to relax.
“Inevitably we will enter the final act the ‘new normal’. The new normal will require firms to adapt their business models, consumers their spending patterns and consequently generate new challenges and change for us.”
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