FSA warns bankers

The Financial Services Authority (FSA) has warned city bankers to be "very frightened" as it launches a new era of tougher regulation.
Hector Sants, chief executive of the FSA, signalled the end of light touch regulation and a box-ticking culture within the regulator that had failed to detect severe risks taken by banks such as Northern Rock.
In its place, the regulator will impose a more draconian regime of checks that will include an assessment of banks’ business models, a key feature of regulation that trade bodies such as the British Bankers’ Association (BBA) said had been missing from the FSA.
Sants spoke at a meeting of executives at Thomson Reuters offices in Canary Wharf, London, yesterday.
He said: "There is a view that people are not frightened of the FSA. I can assure you that this is a view I am determined to correct. People should be very frightened of the FSA.
"I continue to believe the majority of market participants are decent people. However, a principles-based approach does not work with individuals who have no principles."
Sants said the regulators would look into the role played by the senior management of institutions that had failed, though he didn’t name specific firms.
The speech follows a warning from Sants at a conference hosted by the National Association of Pension Funds in Canary Wharf earlier this week. He told pension funds that they were partly to blame for the crisis after they failed to exercise oversight of the businesses they own.
He said that shareholders, including pension funds, would need to take their place alongside regulators as a check on the excesses of over-ambitious managers.

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