Can the FSA be independent?

There are many things wrong with the FSA and, ironically, competence is the main one. We have had statements on Northern Rock indicating systemic failings and seen a once well-supported chair leave.

The irony of the FSA, as far as competence is concerned, is that it sets targets for all regulated firms, yet when it doesn’t deliver, it merely indicates lessons need to be learned.

The retiring chair came from a class investment bank that was a market leader in the UK (Barclays De Zoete Wedd). I worked there too as a director of its equities division, but it was not to last in its parent’s plans for the future.

The culture of that firm was to be innovative and forward thinking. It had a management that was fair but firm and, above all else, innovative. Failure was not an option and even without the massive capital thrown to American contemporaries it held its own time and again.

The appointment of an employee from there was welcomed principally because he had been on the front line and had participated in day-to-day events.

“There are many things wrong with the FSA and, ironically, competence is the main one.

So what went wrong? Possibly the over-zealous legal machinations of governmental bureaucracy, leading to the disproportionately sized rule book we now suffer. A rule book which is claimed not to be enforcement-led.

Naïve as this question may appear, if that is the case why is it so large when compared to every other European country objectively operating the same rules?

When our own government expenditure appears out of control, most particularly if we add in off-balance sheet liabilities, we now have our esteemed regulator’s own accounts looking equally dire: A £30m plus pension liability, notoriously high staff turnover and the drawing down of a £100m loan facility.

But don’t worry fellow regulated folk, all is under control so long as you do what it says but not as it does, or you could be closed up. Or maybe not if your debt is so large it doesn’t know what to do.

Alternatively you can ignore all it says if your budget is big enough to threaten it with legal action, whereupon it has an historic penchant for backtracking; but heaven help the small firm, for not crossing a ‘t’ or dotting an ‘i’.

“Lets face it. Any firm that does not treat customers fairly will go under pretty damn quick.

We can only hope that the new chair, along with the recently appointed chief executive, will use their banking knowledge and stop adopting political policies that are in the final analysis mere rhetoric. There has been too much political interference that has made the FSA unable to cope, and it needs a fresh and honest assessment of what it is capable of doing, and what it is not, because to continue as it is will make it a laughing stock.

Let’s face it: any firm that doesn’t treat customers fairly will go under pretty damn quick, and it doesn’t need patronising threats telling folk, who have been doing the right thing by their clients for years, how to do the right thing in hundreds of pages of consultation documents and endless piffle.

Let’s hope the new double act at the FSA, get back to basics, and set above all else to get their own house in order first and foremost, so they can be undeniably seen to lead by example and not operate at the behest of headline hungry parliamentarians and spin doctors who are on their way out and haven’t a clue.

Let’s also see them appreciate that a set of rules for banks can’t be cut and pasted for insurance. And, finally, given the new chair’s historical environmental connections let’s hope he comes to realise that to be more efficient we need less paperwork not more.

With those targets hopefully attained we really can have an independent regulatory body that is second to none, and not one in denial and a mere puppet of political spin.

Robert Marshall is Director of Trident Insurance.