Should we care about the resignation of Hector Sants as chief executive of the UK’s Financial Services Authority?
No disrespect to Mr Sants, but the City watchdog has been a lame duck regulator since the Tories made it clear they would break up the FSA if they win the UK general election in May – which they are likely to. Mr Sants will work his notice until the summer. He has made it clear, however, that he opposes the Tory plans to dismember his organisation, with the supervisory arm being folded into the Bank of England and a new agency taking over consumer protection. Both he and his chairman, Lord Turner, have apparently turned down running the former bit in a new role as a third deputy governor of the Bank. He is an experienced and qualified banker who will no doubt find an interesting new job. So this is not a personal tragedy.
The daily business of the FSA, meanwhile, will continue, whoever its chief executive and whatever its final shape. Its contribution to the debate about the future of regulation will also continue – Lord Turner, after all, has been the main source of ideas in this respect. Moreover, there is a plausible argument that the financial crisis exposed the weaknesses of a principles-based, light-touch, universal regulator. It certainly made a mess of the UK’s tripartite division of supervisory responsibilities between FSA, Bank and the government. A consolidation of those duties may now be sensible. So not much sign of a tragedy here either.
The truth is that despite some regulators in some countries doing very sensible things to improve their oversight of the financial system and prevent a future crisis, in general they have been slow and unco-ordinated. It has been left to politicians to seize the initiative, often with populist policies that may yet have unintended consequences. And, as ever, one suspects that bankers will continue to find ways to work around whatever new rules are eventually put in place. That is the tragedy.
