In a speech delivered on March 12, Hector Sants, Chairman of the UK Financial Services Authority (FSA), signaled a new era of intensive supervision.  

Mr. Sants declared that the philosophy of principles-based regulation, generally characterized as “light touch” is to be replaced by a more "intrusive and direct style of supervision."  

The reasons for the change are based on lessons learned from recent market events as well as a change in the regulator’s philosophy. Further, “to suggest that we can operate on principles alone is illusory, particularly because the policy-making framework does not allow it. Europe, in particular, has a particular penchant for rules and in any case in a number of key areas such as prudential they are indeed necessary."  

Mr. Sants characterized the future direction of the FSA as “outcomes-focused.”He explained this to mean that they would “seek to make judgments on the judgments of senior management and take actions if in our view those actions will lead to risks to our statutory objectives. This is a fundamental change. It is moving from regulation based only on observable facts to regulation based on judgments about the future.”  

He emphasized that this would be an 'intrusive' and 'direct' style of supervision (which he called 'the intensive supervisory model') and stated that this would be allied with a more proactive approach to enforcement termed “our credible deterrence philosophy.”  

Finally, Mr. Sants issued a stark warning: “There is a view that people are not frightened of the FSA. I can assure you that this is a view I am determined to correct. People should be very frightened of the FSA.”