The FSA will take a more intrusive and systemic approach to its supervision of firms in the future, according to its chairman, Lord Turner.
In the Turner Report, published today, the FSA's chairman signalled the regulator will move away from principles-based regulation towards a more rules-based approach.
While the report focuses on the banking sector in light of the credit crunch and the failure of several major UK banks, it will have implications across the financial services sector.
Turner says the FSA's new supervisory approach will be "more intrusive and more systemic," with a greater focus on prudential requirements and system-wide risks.
The FSA will significantly increase its resources for supervising 'high-impact' firms, particularly complex banks, with full business reviews to take place at least every two years.
Regulators will place less emphasis on systems and processes and increase their focus on risks, sustainability of business models and key business outcomes. Supervisors will be more likely to directly intervene in a firm's operations if they believe there is a risk to the financial system.
Approved persons will also be subject to more rigorous assessments, with a major focus on technical skills.
The FSA has issued a discussion paper today to examine how Turner's proposals might work in practice, and the comprehensive review is likely to mean a major overhaul in the regulator's structure and the way it deals with firms.
Contact: John Bakie, Tel: 020 7484 9805, e-mail: [email protected]IFAonline
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