Tory plans to scrap FSA come under fire

Published on Saturday 10 April 2010 14:53

A SENIOR Scottish accountant has questioned Tory plans to scrap the Financial Services Authority (FSA) and transfer its regulatory functions to the Bank of England.

Dougie McAndrew, a partner in the financial services group at Deloitte, said the real issue was not the number of bodies that regulated the financial services industry but how well the organisations' staff performed their duties.

He said the bodies needed to work more effectively together rather than trying to score points off each other, regardless of whether the current tripartite system – involving the Bank of England, the Treasury and the FSA – continued or a new set-up was introduced.

McAndrew told Scotland on Sunday: "I'm not sure it would make a difference. It looks like you're just shuffling the deckchairs. If you put the regulators all together, then you are just moving people around and, like in any merger, you will have a situation where people will still be saying: 'He's from the FSA' or 'He's from the Bank of England' and that could take years to gel together."

McAndrew compared the potential disbanding of the FSA with mergers and acquisitions within the financial services sector and questioned the timing of such a move while the industry is still recovering from the banking crisis and recession.

He added: "If you're merging two companies then you want the risk or compliance departments looking outward and examining the rest of the businesses, not looking inwards and spending time working out how they will integrate. They are the final departments that you would look to merge."

McAndrew also highlighted the growing emphasis being placed on the role of non-executive directors in financial services firms.

He said that companies were now looking for their non-execs to take on a more interrogative role and to be more up-to-date on risk and compliance issues.

The greater workload may make some more senior workers – who may have considered a move into a non-exec role – consider a job with the FSA or other regulators instead, McAndrew suggested.

He added that such a move could benefit the industry as a whole because companies may feel more comfortable dealing with regulators who have more experience of real businesses.

Owen Kelly, chief executive of Scottish Financial Enterprise, said: "Government will decide on the FSA and Bank of England roles but, for the industry, the effectiveness of regulation is more important than the structure that is seeking to deliver it.

"On the suggestion that we may see more industry people choosing to make a move later in their careers from companies to the regulator, rather than to non-executive posts, we would say that the more experience and understanding of our industry that is brought to bear by regulators, the better."