Difference between revisions of "Financial Services Authority"

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===External===
 
===External===
 
*[[College Public Policy]] provides public affairs advice to the FSA<ref>APPC register, to Nov 2008</ref>
 
*[[College Public Policy]] provides public affairs advice to the FSA<ref>APPC register, to Nov 2008</ref>
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==Contacts==
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25 The North Colonnade,
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Canary Wharf,
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London E14 5HS<br>
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Website: www.fsa.gov.uk
  
 
== Notes==
 
== Notes==

Revision as of 14:38, 27 March 2009

The Financial Services Authority (FSA) is the UK's financial watchdog.

Structure

The FSA is an independent non-governmental body, given statutory powers by the Financial Services and Markets Act 2000. It is a company limited by guarantee and financed by the financial services industry. HM Treasury appoints the FSA Board, which currently consists of a Chairman, a Chief Executive Officer, three Managing Directors, and 9 non-executive directors (including a lead non-executive member, the Deputy Chairman). This Board sets overall policy, but day-to-day decisions and management of the staff are the responsibility of the Executive. [1]

Role

The FSA describes its role as "promoting efficient, orderly and fair markets and to help retail consumers achieve a fair deal". It is given a range of rule-making, investigatory and enforcement powers in order to meet four statutory objectives: 1 market confidence: maintaining confidence in the financial system; 2 public awareness: promoting public understanding of the financial system; 3 consumer protection: securing the appropriate degree of protection for consumers; and 4 the reduction of financial crime: reducing the extent to which it is possible for a business to be used for a purpose connected with financial crime.

Failure to regulate

In early 2007 as the financial crisis began to intensify, the FSA, under McCarthy, was still arguing for “light touch” regulation for hedge funds, seen as a key driver of financial instability.[1] In autumn 2007, McCarthy said the growing calls for increased regulation of the financial services industry were a “mad dog” reaction.[2] By then the European Central Bank had already pumped €95billion into the market to improve liquidity and the UK had experienced a run on a bank, Northern Rock.

Early in the crisis the FSA reassured people that Northern Rock was “solvent.”[3] Economics journalist Alex Brummer, author of The Crunch, noted that the FSA’s “actions suggested it hadn't a clue about the weakness of the Rock's securitization model.”[4]

The FSA was widely seen as the regulatory authority with the most to blame for allowing Northern Rock to fail. It was accused by the British MP John McFall, head of the influential Treasury Select Committee, of “not just sleeping, you were comatose'” over Northern Rock.[5] The Treasury Committee's report on the scandal determined that the FSA had “systematically failed in its duty.” “The failure of Northern Rock, while a failure of its own board, was also a failure of its regulator,” it said.[6]

McCarthy’s refusal to accept responsibility for the FSA’s role in Northern Rock’s downfall angered parliamentarians. One MP on the Committee, Sion Simon, told McCarthy: “You are the Sugar Ray Leonard of the financial services sector; a world-class ducker and diver, bobber and weaver.”[7]

When a senior UK politician, Liberal Democrat Treasury spokesperson Vince Cable, raised concerns about Northern Rock, it was reported that McCarthy had tried to “gag” him. Cable said: “Sir Callum said I was scaremongering, that there was no problem with the bank and that it had a good loan book, and any problems were due to international markets beyond its control.”[8]

In fact, the FSA failed to examine the risky nature of the whole banking sector. McCarthy’s replacement at the FSA, Lord Adair Turner, has now admitted that the FSA and other regulators had failed to see that by 2004 the banking system was moving in a direction that created a “large systemic risk”. “With hindsight” said Turner “the FSA was focused too much on individual institutions .... and not adequately focused on the totality of the systemic risks across the whole system, and whether there were entire business models, entire ways of operating, that were risky.”[9]

People

The Board

External

Contacts

25 The North Colonnade, Canary Wharf, London E14 5HS
Website: www.fsa.gov.uk

Notes

  1. ^The Financial Services website, FSA Home Page Last viewed 01.02.07

References

  1. ↑ Melanie Wold, “Letting hedge funds be hedge funds: FSA tries to show rest of Europe that a light touch is enough”, Securities Industry News, February 12, 2007
  2. ↑ Sean O'Grady, “FSA chief warns clamour for regulation is 'mad dog' reaction”, The Independent, October 22, 2007, p40
  3. ↑ Alex Brummer, “Watchdog that failed to bark”, Daily Mail, November 21, 2007, p75
  4. ↑ Alex Brummer, “Watchdog that failed to bark”, Daily Mail, November 21, 2007, p75
  5. ↑ Richard Northedge, “The rise of McFall – Profile, John McFall MP runs the Treasury Select Committee and will this week grill Mervyn King, making him a key figure in how this year's financial crisis will unfold”, The Sunday Telegraph, 2008, December 16, p6; Sam Fleming, “Treasury man who tramples on toes; the crunch interview”, Daily Mail, August 7, 2008, p74
  6. ↑ Christine Seib, “MPs demand new regulator as FSA stands condemned”, The Times, January 26, 2008, p52
  7. ↑ Hansard, Uncorrected Transcript of Oral Evidence to be Published as HC 999-ii, House of Commons, Minutes of Evidence, Taken before Treasury committee, Financial Stability and Transparency, October 9, 2007
  8. ↑ Mail on Sunday, “Watchdog boss 'tried to gag MP' over Rock crisis alert”, February 24, 2008, Section FB, p2
  9. ↑ Terry Macalister, “City watchdog chief admits regulators failed to spot looming financial disaster”, The Guardian, 16 February, 2009
  10. ↑ APPC register, to Nov 2008
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