Posted on 12 November 2009
In a recent speech Hector Sants, FSA Chief Executive observed that real reform requires changes both to the rules and the culture of the financial services industry. He commented that he “remained unconvinced that all senior management have taken on board the need to change and operate in a genuinely different manner” and it was, therefore, essential for the FSA to facilitate further behavioural change.
The reform of the FSA’s authorisation processes and significant influence function regime is designed to ensure that individuals have both the required technical expertise and the necessary integrity, though Mr Sants noted the difficulty of making the necessary judgments and announced that the FSA would be publishing a Discussion Paper on the subject.
Mr Sants believes the two principal tools that the regulator can use to influence culture are governance systems and people. The FSA will be seeking to identify mechanisms for assessing the effectiveness of culture during its risk review process, - this will include assessing the impact of the board on an institution’s culture. The FSA’s "fit and proper" regime will also seek to determine an executive’s ability to set a strong ethical framework and foster the right culture. He warned that firms that refused to adjust their behaviour could expect “tough action” from the FSA, including imprisonment.
Related Link: Transcript of the speech
