Feb 25 2008 Martin Coyle
Recent problems in the financial markets will not sway the Financial Services Authority in its march towards more principles-based regulation, a senior FSA director has told Complinet. Verena Ross, director of strategy and risk at the FSA, also believes that compliance officers will increasingly have to bring a different skill set to their roles as a result of the shift from a purely rules-based approach.
Ross, who took up the risk role in November, said it was clear that with any regulatory approach problems, such as those that occurred at French banking giant Société Générale, would arise occasionally. She added that a number of issues had come to the fore, which the FSA was studying closely.
"We are still looking very carefully at our regulatory regime and the lessons we can learn from what has happened. But we are also of the view that at the moment it doesn't fundamentally undermine our overall regulatory approach even if there are lessons that can be learned about the specific ways in which we deal with issues," she said.
Ross, who has previously worked at the Bank of England, stressed that firms should take steps to manage their risks, and ensure that any potential conflict of interest issues are kept under control. She pointed out that it was extremely difficult for the FSA to set out very detailed rules for every single issue that could arise. Instead the regulator was keener to set out which regulatory "outcomes" it desires from events.
This would give firms the freedom to work out internally what they needed to do to meet the FSA's expectations, she said. Ross added that the FSA was very conscious of the fact that it had to work with firms and trade bodies to ensure that its standards were widely understood.
New approach
With compliance officers increasingly having to take a more judgement-based approach to their work under the new regime, Ross was keen to stress that FSA staff also had to change their approach. She said that the regulator had done plenty of work with its staff to ensure they were trained appropriately. Firms should do the same, she added.
"I would have thought that firms would want to do the same when they look at their compliance function because it is very important that compliance engages properly with senior management to bring regulatory issues into the broader business consideration. This is a different skill set from what was traditionally required."
Looking to the future, Ross said that there was an ongoing programme to review the FSA Handbook, but the changes would not be made for the sake of introducing more principles-based regulation.
"Clearly it involves costs for firms as they change. We will try to do it in line with changes that will happen anyway. We will continue to work closely with the industry on looking at whether further support and advice from us is necessary in certain areas," she said.
