Lord Turner’s speech at FSA’s Annual Public Meeting looked back over his time as chairman of FSA. He noted the regulatory failings the financial crisis had revealed:
- “woefully deficient” bank capital and liquidity rules;
- a deficient and under-resourced approach to prudential supervision; and
- absence of systemic analysis and macro-prudential policy tools in the “underlap” between the BoE and FSA.
He looked at the measures FSA has already taken to address the first two issues, and at how the new regulatory structure will address the underlap. He noted that, although 2008 saw a prudential crisis, FSA is increasingly facing evidence of conduct crises too. He said the Financial Conduct Authority (FCA) must in future find ways to intervene earlier. He spoke of FSA’s work on the structure of incentives, including payments to platform providers.
He then turned to FSA’s plans for mortgage market reform, saying FSA’s forthcoming consultation will look to prevent a return of poor lending practices which meant some firms sold mortgages to customers who could not afford them. He said FSA had perhaps concentrated on the retail markets in the past, and applied more of a “caveat emptor” approach to the wholesale markets. He said the LIBOR and other problems mean it should reconsider this approach.
He finished by saying FSA would be ready for the regulatory change-over by March, but that it is likely to happen in April 2013, following Royal Assent to the FS Bill and giving time to make all necessary secondary legislation.(Source: Lord Turner Speaks to APM)