Intrusion will keep FSA ahead of banks

Author: | Published: 28 Apr 2010
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If the UK Financial Services Authority (FSA) is to stay ahead of banks’ innovative activities and foresee the next potential crisis, it must prepare to be more intrusive in its supervision of internal banking practices.

“It’s always hard to predict how banks will innovate,” said Peter Bevan of Linklaters, speaking at today’s IFLR European Capital Markets Forum. “But there will be much more second-guessing of business models to avoid just re-regulating past risk.”

So far, he said, regulatory intervention has always been one step behind the industry, responding to past risk and failing to look forward to what could cause the next problem.

And changing that model will require closer and more intrusive supervision of banking activity, from conception to origination and beyond.

But the FSA may have some way to go before it is adequately equipped to meet the level of intrusion and supervision necessary. This was illustrated by Bevan’s description of the reaction he gets from clients that he’s prepared for FSA director interviews.

“They always say that we were much tougher than the FSA,” he said. “Of course that’s how it should be, but it also means that, in its own words, the FSA needs to ‘upskill’ to improve the judgments that it makes.”