Sants calls for new regulatory system

A fundamental change to the structure of the regulatory system for private banks and other financial services firms has found support from the head of the City watchdog.

Hector Sants, chief executive of the Financial Services Authority (FSA), said that a ’strengthening’ of the Bank of England’s powers was needed.

He added that the new regulatory framework needed to focus on systemic risk rather than individual risks and that the scope of firms under scrutiny should be increased in order to prevent future crises.

The current tripartate system of the Treasury, the Bank and the FSA has faced criticism in the credit crunch for allowing UK banks to pursue risky business models in the first place.

In the Turner Review released earlier this year, the FSA itself confirmed the need for a stronger regulatory framework.

Mr Sants said: ’In my view, this needs to be done jointly between the central bank and the prudential regulator. Risk identification must involve information from both bottom-up and top-down.’

He added: ’This approach will need to extend to institutions performing bank-like functions which have in the past escaped our regulatory requirements.’

Mr Sants’ comments were made in a speech to the Association of Corporate Treasurers.ADNFCR-2318-ID-19174187-ADNFCR