Sants or Sinner at the FSA?

Hector Sants has announced his departure from the FSA after three monumental years that has seen the finance industry almost collapse and with politicians taking a direct role in saving the UK banks. The fact that this scenario had to be played out casts a shadow over the regulatory capability of the FSA and of course Sants who has to take ultimate responsibility. It's normal that when a senior name departs a large institution platitudes appear from all quarters and this has already started with Sants announcement. After just three years in charge and the job hardly done and with the financial crisis still in recovery, are the thanks to Sants warranted? Over recent years the ability of the FSA to carry out their responsibilities has to be questioned. How can so many financial institutions have been allowed to fail on Sants watch? How can his time at the FSA be viewed as a success when so much that needs to be done remains undone? The technology systems capability of the FSA to be effective in its role is questionable. The FSA was not effective in controlling the major risk issues that the Banks engaged in, that caused the current financial crisis. Efficient, productive regulation appears to be more in doubt than ever. During the course of recent research for a whitepaper on compliance, interviews conducted with a number of compliance directors from both buy and sell sides showed how confusing and difficult they found it in trying to being able to comply with certain rules emanating from the FSA. Many rules have been overly complicated especially since MiFID and with the FSA's policy to be principled based rather than having a more prescriptive approach as used by all other major financial markets, has not helped. This has created an apples and pears problem in international banking and the FSA has been intransigent in changing its policy. When the current FSA structure was created by Brown in the first term of the current Labour government many people in the City were concerned that a dinosaur was being born rather than an agile modern intuition able to adapt to the rapidly changing financial markets. This worry looks very well founded now! Although Sants has only been in control for the last three years he has failed abysmally to recognise the needs of the financial markets and put in place systems and structure for the FSA to have a long term role. Indeed should the Conservative Government win the next election, we will see a complete reorganisation of the regulatory structure and the return of the Bank of England into primary control. Hardly a statement of Sants success! In my opinion Sants is no saint but is not a sinner. His departure should be welcomed as it looks like the first brick out of a wall soon to be pulled down. It preludes reorganisation and rebuilding of the City's regulatory structure and hopefully a new dawn of effective and sensible regulation. But on the other hand the timing of his departure is unfortunate, as stability is needed by the City but it is in keeping with what we have seen over the last three years.           By Gary Wright