FSA: Another Broken Government Legacy

It is time to lay into the FSA, the Financial Services Authority, the financial services watchdog. I watched Chairman Lord Turner and Chief Executive Hector Sants answering questions by the Treasury Committee today and as I did, my blood started to boil. Turner stated that the reason that half of the banks in the UK under his watch had gone out of business was because of "political assumptions" that were made by the FSA to use a "light touch" approach to its job of regulating the banks.

The first thing that made me angry was that this organisation which was set up by the current Labour government was in some way it appeared trying to blame its architect instead of taking responsibility for its lack of appropriate activity. The inference that can be taken from these "political assumptions" is that they could only have been constructed from hints and suggestions made directly by the government. This may be the case but the FSA is supposed to be an independent body. It says so on its own website (http://www.fsa.gov.uk/Pages/About/Who/index.shtml). This means that it should not be making assumptions based on politics at all. To do so is to undermine its very existence.

The second thing that upset me was the fact that these two managers, under whose watch we have lost half of our top ten big retail banks think that it is acceptable that they should be allowed to announce plans to close the stable door after the horse has bolted. They have admitted that the FSA is not fit for purpose but that it can be if some changes are made. What the bloody hell have these people been doing for the last however-many-years that they've been in charge? How is it that now, when the heat is on, they can suddenly come up with ideas in a couple of months or even weeks perhaps that can fix everything? If they have come up with a viable plan to fix the FSA then why didn't they do it before the system broke?

The FSA has failed three of its four statutory objectives of late and the two people in charge need to go. They won't! Neither will they resign nor will they be sacked. Why? Firstly because if they're sacked then the government will have to admit that their regulatory framework has failed. That's never going to happen with Gordon Brown in power. If they resign, they will be out of a cushy number which pays a great salary, wonderful pension, flexible working environment and oh yes....a bonus. Lets just remember what the government has said so robustly about rewarding failure before we remember that these individuals will undoubtedly get a nice bonus at the expense of the tax payer. Not a bad deal if you can also manage to reduce your responsibility by 50% whilst on the job...is it?