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.
Its always hard to predict how banks will
innovate, said Peter Bevan of Linklaters, speaking at
todays 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 Bevans description of
the reaction he gets from clients that hes prepared for
FSA director interviews.
They always say that we were much tougher than the
FSA, he said. Of course thats how it should
be, but it also means that, in its own words, the FSA needs to
upskill to improve the judgments that it