May 16 2008 Peter Elstob
The Financial Services Authority has postponed, for a second time, a planned discussion paper on what chief executive Hector Sants described as the critical and important policy area of regulatory transparency. Complinet has learned from industry sources that the DP, originally due out in April, was planned for publication on Monday. But speaking to a senior management conference yesterday, Sants said that it would appear "mid-year".
Industry welcomed the FSA's decision, which means that the three-month discussion period will now end in the autumn rather than during the dog days of August. A number of trade bodies, however, have attempted to persuade the FSA that this is not a good time to start opening a can of worms like the degree of transparency appropriate to the information that passes between the regulator and firms, and have urged it to put the discussion back even further. There are also concerns that more regulatory transparency, the need for which the FSA says is driven both by freedom of information legislation and its own better regulation agenda, may stray too much into public disclosure of commercially sensitive information about individual firms.
Sants told the Securities & Investment Institute's annual conference that the FSA saw developing its avowed role of a transparent regulator in a climate of growing calls for more open information as one of the important strategic issues it needed to tackle. It was not a debate about whether there should be regulatory transparency. "This debate is about what to disclose, to whom and for what purpose. We are seeking to develop overarching principles we can apply to any particular set of circumstances that will help us decide whether to use transparency as a regulatory tool," Sants said.
At the moment, however, the FSA is applying transparency more in some sectors, such as insurance, than in others, such as banking. This, said Sants, was "not a healthy position to be in". Firms should, he said, have a good understanding of the FSA's decision-making process in what was a critically important area.
The FSA therefore believed it should take forward "a proper dialogue, a proper discussion with industry, to make sure that we have an understood – hopefully agreed, but certainly understood — framework … for decision making in this area of transparency".
When it does appear, he said the DP will include "a draft suggestion" for a decision-making framework. Asked by Complinet to comment on industry concerns about public disclosure of information and data on individual firms, Sants said: "[The DP] certainly does not propose that we should be making public information provided to us in the belief that that information would be confidential. There would obviously be a breakdown in trust between us and the firms which we regulate if information that was believed to be confidential at the time that it was handed over was then put into the public domain."
Sants told the conference: "We should ensure that … you can trust us to use the information you give us in the way that you expected it to be used." The framework for regulatory transparency would address industry concerns in a sensitive way, and Sants pointed out that considerations of financial stability and commercial confidentiality would prevent damaging disclosures.
"I can't see us publishing data that we thought in any way was undermining financial stability," he said.
