Financial Services Authority

The Financial Services Authority (FSA) is an independent non-governmental body, given statutory powers by the Financial Services and Markets Act 2000. It is financed by the financial services industry.

The Treasury appoints the FSA Board, which consists of a Chairman, a Chief Executive Officer, three Managing Directors, and nine non-executive directors (including a lead non-executive member, the Deputy Chairman). The Board sets overall policy, but day-to-day decisions and management of the staff are the responsibility of the Executive. The Chairman is formally appointed to the FSA board for five years and other members for three years.

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.

Role

The FSA describes its role as "promoting efficient, orderly and fair markets" and "helping 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. In autumn 2007, McCarthy said the growing calls for increased regulation of the financial services industry were a “mad dog” reaction. By then the European Central Bank had already pumped €95 billion 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.” 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.”

The FSA was widely seen as the regulatory authority that was 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. 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.

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 ...”

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.”

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.”

People

The Board

• Lord Adair Turner, Chairman. Took over from Sir Callum McCarthy when he left in Sept 2008.
• Dame Deidre Hutton CBE, Deputy Chairman
• John Tiner, Chief Executive
• Clive Briault, Managing Director
• Sir James Crosby, Non-executive Board Member
• Peter Fisher, Non-executive Board Member
• Brian Flanagan, Non-executive Board Member
• Karin Forseke, Non-executive Board Member
• Sir John Gieve, Non-executive Board Member
• David Kenmir, Managing Director, Regulatory Services
• Proffessor David Miles, Non-executive Board Member
• Hector Sants, Non-executive Board Member
• Michael Slack, Non-executive Board Member
• Hugh Stevenson, Non-executive Board Member

Members

Since January 2000 there have been 36 different members of the FSA board. Biographical information on the members is below.

Robert Smith (December 1997 - December 2000): Before joining the FSA Smith worked at ICFC (now 3i), the Royal Bank of Scotland, Charterhouse Development Capital Ltd, Morgan Grenfell Private Equity, Morgan Grenfell Asset Management, MFI Furniture Group plc, Stakis plc, Tip Europe plc and Network Rail. He subsequently became Vice Chairman of Deutsche Asset Management, Chairman of The Weir Group plc and Scottish and Southern Energy and a non-Executive Director of 3i Group plc, Standard Bank Group Ltd, and Aegon UK plc.

Stephen Thieke (December 1997 - December 2000) (November 2002 - June 2005): Before his first appointment at the FSA, Thieke worked at JP Morgan & Co in New York as Chairman of its Risk Management Committee and Head of Corporate Risk Management. During his first term on the board he was chairman of [[RiskMetrics Group]. He was reappointed to the FSA board in 2002 and was also a member of the Board of Directors of PNC Financial Service Corp.

Keith Oates (February 1998 - February 2001): Before joining the FSA Oates was Executive Deputy Chairman of Marks and Spencer plc and Chairman of all the Marks and Spencer Financial Services Companies. He was also a Non Executive Director of British Telecommunications. He subsequently joined Coutts & Co as director of its new Monaco office and became a non-executive director of Diageo plc.

Phillip Thorpe (June 1998 - May 2001): Before joining the FSA Thorpe was Director and Chief Executive of the Investment Management Regulatory Organisation from 1993 to 1998 and Director of the Securities and Futures Authority from 1991 to 1993. He was Chief Executive of the Association of Futures Brokers and Dealers from 1989 to 1991. Between 1981 and 1989, he held various posts with the Hong Kong Securities Commission and was Chief Executive of the Hong Kong Futures Exchange. He subsequently held positions at the Dubai Financial Services Authority in and the Qatar Financial Centre Regulatory Authority.

David Clementi (September 1997 - 31 August 2002): Before joining the FSA Clementi had worked at Kleinwort Benson (1975–97) and as Manging Director of KB Securities (1987–89). In 1997 he joined the Bank of England. He was subsequently appointed chairman of Prudential and a non-executive director of Rio Tinto plc.

Keith Whitson (December 1998 - May 2003): Before joining the FSA Whitson worked at Hong Kong and Shanghai Banking Corporation Ltd where he was appointed UK CEO in 1987. He later worked at Midland Bank where he was CEO 1994–98. During his time at the FSA he was also Group Chief Executive of HSBC Holdings Plc. In 2005 joined the food packaging multinational Tetra Laval as a non-executive director.

Howard Davies Executive Chairman, (July 1996 - September 2003): Before joining the FSA Davies worked at the Foreign Office and the Treasury. He worked at the management consultants McKinsey & Co. Inc. (1982–87) and was a Director of GKN plc (1990–95). From 1992 to 1995 he was Director General of the Confederation of British Industry, a Director of Business in the Community and a member of the International Advisory Board of NatWest. He subsequently joined Morgan Stanley Inc. in 2004 and Paternoster Ltd in 2006.

Carol Sergeant (June 2001 - November 2003): Before joining the FSA Carol held a number of positions at the Bank of England. She joined Lloyds TSB Group as Chief Risk Director in February 2004.

Christopher Rodrigues (December 1997 - December 2003): Before joining the FSA he had been Chief Executive of Thomas Cook Group Ltd. He also worked at American Express and the management consultancy company McKinsey & Co. During his time as a non-executive director of the FSA he was also Group Chief Executive of FSA-regulated Bradford and Bingley and a non-executive director of Energis PLC. He was subsequently appointed Chief Executive of Visa International and a non-executive director of the Hilton Group and Ladbrokes plc.

Stewart Boyd Deputy Chairman (March 1999 - March 2004): Before joining the FSA Boyd worked as a QC with expertise in banking, financial services, company law and insolvency, competition and restrictive practices.

Michael Foot (June 1998 - May 2004): Before joining the FSA Foot held a number of positions at the Bank of England. He was subsequently appointed Chairman of Promontory Financial Group (U.K.) Ltd, the London-based affiliate, of the international financial consultancy company Promontory Financial Group.

Moira Black(December 1998 - December 2004): Black was previously a partner in Price Waterhouse. Whilst at the FSA she was also a Chairman Consumer Communications for England and a Non-Executive Director of The North West London Hospitals NHS Trust and Octagon HealthCare Ltd, a special purpose vehicle created by 3i plc, Barclays and Innisfree. In 2005 she was appointed a Non-Executive Director of Octagon Healthcare Group Ltd and Octagon Healthcare Funding plc. In 2007 she was appointed a non-executive director of D1 Oils plc, the UK-based global producer of biodiesel.

Gillian Nott (December 1998 - December 2004): Before joining the FSA, Nott was Chief Executive of ProShare (UK) Ltd, and a non-executive director of several companies, including Baronsmead VCT plc, Baronsmead VCT 2 plc and H W Group plc. She had also worked for BP plc, where she managed their venture capital portfolio. Whilst a non-executive director at the FSA she was also chairman of the FSA-regulated Baronsmead Venture Capital Trust, a Director of Foreign and Colonial Pacific Investment Trust Ltd and a Director of Martin Currie Portfolio Investment Trust PLC. In 2005 Nott was appointed a Non-Executive Director of Merrill Lynch British Smaller Companies Trust Plc (formerly 3i Smaller Quoted Companies Trust PLC). In 2006 she was appointed Chairman of Witan Pacific Investment Trust PLC. She also joined the board of a number of listed companies including Witan Pacific Trust and F&C Pacific Investment Trust PLC.

Shamit Saggar (December 1998 - December 2004): Before joining the FSA Saggar was Reader in Government at Queen Mary & Westfield College, University of London. Board member of the National Consumer Council. A non-executive member of the Whittington Hospital NHS Trust. A Governor of the Peabody Trust. Member of the Advisory Council, Institute of Citizenship.

Andrew Large (September 2002 - January 2006): Before joining the FSA Large had worked at BP and Orion Bank and served as Deputy Chairman of Barclays Bank, and a Chairman of the financial services company Euroclear. He had also served as a non-executive of Nuclear Electric, Rank Hovis McDougall, Phoenix Securities, Dowty Group, English China Clays, and a Non-executive Chairman of Luthy Baillie Dowsett Pethick. After leaving the FSA board he joined Axis Capital in Bermuda and MW Tops Ltd as Chairman.

Tom de Swaan (January 2001 - January 2007): Before joining the FSA de Swaan was Chief Financial Officer and Member of the Managing Board of ABN AMRO. Whilst he was at the FSA de Swaan remained Chief Financial Officer and Managing Board Member at ABN AMRO Bank NV and was also appointed a Non-Executive Director of GlaxoSmithKline PLC. He was also concurrently a member of the Board of Directors of Zurich Financial Services and Vice Chairman of the Supervisory Board and Chairman of the Audit Committee of Royal Ahold.

Kyra Hazou (January 2001 - January 2007): Before joining the FSA Hazou was Managing Director and Regional General Counsel, Salomon Smith Barney/Citibank.

Clive Wilkinson (January 2001 - January 2007): Before joining the FSA Wilkinson was a local government official and an NHS executive.

John Tiner Chief Executive (June 2001 - July 2007): Before joining the FSA Tiner worked at Arthur Andersen where he was a partner from 1988–2001. He was also a Managing Partner of Global Financial Services from 1997 to 2001. In 2008 he was appointed a director of Star Asset Management Group plc and Lucida plc.

External

• College Public Policy provides public affairs advice to the FSA.

Contacts

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

This article is part of the Revolving Door project of Spinwatch.

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