Comment: March 2010

Hector Sants, the chief executive of the Financial Services Authority will be leaving this summer after three years in the job. Prior to joining the FSA, he was Chief Executive for Europe, Middle East and Africa for Suisse First Boston, the investment bank.

Sants joined the regulator in May 2004 as Managing Director of Wholesale Institutional Markets. He was promoted upon the departure of John Tyner shortly before the Northern Rock debacle. It has to be said that he was handed a poisoned chalice as the inadequate regulatory supervision which allowed the Northern Rock situation to arise, all happened on John Tyner’s watch (Tyner incidentally, might be considered for the nickname of ‘Teflon Tyner’ as he managed to walk out Andersons shortly before that international firm accountants disappeared in the wake of the Enron scandal.

While Sants claims that he always intended to serve only three years, he certainly did not make that clear at the time of his appointment. Indeed his departure seems to have caught many people on the back foot. There could of course also be a number of sub-plots. There is speculation that the Conservatives if elected would want Sants to become a Deputy Governor of the Bank of England. George Osborne, the Shadow Chancellor, has already made clear that any incoming Conservative Government would abolish the FSA and hand regulatory responsibility to the Bank of England. This of course, will make it somewhat difficult to recruit a replacement.

Whilst Sants has made big noises during his tenure with regard to tightening up regulation and making it more efficient, the best he can claim is to have partially succeeded. The FSA before his appointment, and since, has always claimed that it runs a ‘risk-based’ regulatory regime. Unfortunately, its ability to identify risk has been poor and did not seem to improve under Sants. In spite of all the posturing and loud noises, the banks have come through the last three years relatively unscathed in regulatory terms. However IFAs, who as an industry sector can very fairly claim to be far more professional than the body which regulates them, have been battered. Friendly Societies who present minimal risk to the public have also been kicked from pillar to post. If a proper risk assessment were ever to be done, Friendly Societies would hardly be bothered at all and IFAs would have a much softer and more laissez faire regime. Then there is the RDR. Much criticised and clearly miss conceived in places, the storm clouds are gathering and are likely to soak whoever is in charge when implementation starts. A good time not to be around!

If the Conservatives do win the next election, and if the FSA is disbanded, there is not much hope frankly that things will improve overnight. The ‘think-tank’ which the Conservatives have put together to consider the future of regulation includes several ex-FSA personnel and it seems likely that many of the current incumbents will simply move across and do more or less the same job but under a different master.

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