2 THE IMPLICATIONS OF THE FINANCIAL
CRISIS FOR REGULATION
Introduction
5. The financial crisis has caused
the whole regulatory landscape to come under scrutiny: levels
of acceptable risk to the public, who should bear those risks,
the adequacy of fundamental compliance requirements, how to mitigate
incentives toward non-compliance, how to avoid moral hazard and
unintended consequences of genuine attempts to comply with regulation,
quality of enforcement; supervisory resources and co-operation
between regulators at the national and international level. We
wanted to establish the extent to which the issues raised by the
financial crisis need to be addressed in other sectors. What lessons
for wider regulation can be learned from the crisis, and is there
a valid read-across to other areas? Is Better Regulation still
a valid project? To help answer those questions we first asked
our witnesses about the uniqueness or otherwise of the financial
sector. We also considered the response to the financial crisis
itself.
IS THE FINANCIAL SECTOR UNIQUE?
6. The complexity of financial markets, the global
nature of the sector, the nature of corporate and personal incentives,
and the consequences of failure: arguably these are all characteristics
that distinguish the financial sector from others. In evidence,
Sir William Sargent, the then Executive Chair of the BRE, pointed
to the greater global interconnectedness of the financial sector
over others,[2] and the
Financial Services Authority (FSA) agreed that the financial world
had certain unique features.[3]
Perhaps not surprisingly, representatives of business also wanted
to reinforce the perception that the financial sector is in many
ways unique, as their evidence had shown concern about the possible
impact of regulatory overspill,[4]
and this was reinforced in the oral evidence sessions.[5]
However, it was noteworthy that Which?[6]
the TUC, and the Risk and Regulation Advisory Council (RRAC)[7]
also largely took the view that the read-across to other sectors
should be cautious. Nevertheless, the RRAC observed that financial
incentives could operate to frustrate regulatory aims in all business
sectors, and problems of inadequate enforcement and implementation
and of understanding risk are common to all regulatory areas,
so that an examination of failings in those areas is valuable
in a broader context.
7. Although there was a strong thread of evidence
to suggest that the main failings were not of regulation but of
regulators,[8] and our
findings below to a large extent support the view that there were
areas of underperformance, we do not suggest that there is no
need for any change in substantive financial regulation, particularly
as that is in any case a matter for others. PricewaterhouseCoopers
said: "There is a danger that collectively, authorities in
different jurisdictions will make the assumption that the current
economic difficulties have arisen because of a failure of regulation
rather than a failure in the supervision of existing regulation.
Both need to be reviewed."[9]
The Turner Review[10]
includes recommendations for such substantive changes, including
in the areas of capital adequacy and supervision of credit rating
agencies, with further proposals emerging as this report goes
to press. It would be remarkable if the response to a financial
crisis of such magnitude did not include at least some shift in
underlying regulation.
THE RESPONSE TO THE FINANCIAL CRISIS
8. We were not looking expressly
at how to improve financial regulation, but we were interested
in perceptions of the regulatory response to the crisis so far.
In written evidence the RRAC said: "there is currently a
high degree of unhelpful institutional pressure and short-termism
involved in regulation which makes it harder for reasoned, long-term
judgement to take precedence over intuitive quick reactions."[11]
Nevertheless, by the time of the evidence session their chairman
Rick Haythornthwaite was able to say that there had been a "cold,
hard look at a systemic, evidence-based level," although
he warned that there remained a need for some collective deep
breaths so as to avoid mistakes that might later be repented.[12]
The danger of regulatory over-reaction was referred to by other
bodies. The Association of Chartered Certified Accountants (ACCA)
warned against it, commenting sagely that:
"The financial crisis has not exposed a
world where workplace injuries, employer misconduct or lapses
in food standards are more frequent or damaging than previously
thought."[13]
9. Both Sir William Sargent and Jitinder Kohli of
the BRE believed that knee-jerk responses as warned against by
the former Better Regulation Commission had been avoided.[14]
We agree that the Government's response to the crisis to date
has been measured and has avoided any temptation to over-regulate
in other sectors. Later in this Report we point to some lessons
of wider application, but subject to those we agree that it would
be unwise to assume a wholesale need for more intrusive regulation
in other sectors because of what has happened in global finance.
There is, however, a case for better implementation, and for regulators
generally being more willing to use the tools available to them.
10. The ACCA summed things up in this way:
"The circumstances and regulation of financial
services are unique in many ways, and thus any parallels drawn
between financial regulation and the wider regulatory agenda must
be treated with caution. ACCA's view is that the financial crisis
was caused primarily by a failure of governance, and only facilitated
by the inadequacy of regulation or oversight. Nevertheless, we
agree that some of the lessons from the recent financial crisis
could be adapted for the benefit of the wider regulatory agenda."[15]
Regulatory lessons of the financial
crisis
11. A number of recurring themes emerged when we
asked about the lessons of the crisis. Fundamental among these
was a plea not to attempt to remove risk entirely from regulated
systems. The Association of British Insurers' evidence observed,
"Risk is inescapable and risk-taking is inherent to all life
and economic activity."[16]
Consumer Focus and the TUC agreed that it is not possible or desirable
to eliminate risk.[17]
As the RRAC's evidence put it, there is no such thing as a perfect
regulatory system; every system will have human limitations and
there needs to be room for sensible failure.[18]
12. Commentators have observed that risk especially
in financial systems tends naturally to flow to where it can avoid
regulatory control.[19]
Accordingly, a further common theme that emerged during the inquiry
was the need for regulators to stay a step ahead of the game,
and there was a feeling that this had been one of the principal
failings of the past. Stephen Haddrill of the Association of British
Insurers (ABI) asked:
"Are we really looking for the dynamics
in the market, the potential unintended consequences in the way
that firms will inevitably take changes in rules or change in
regulation and try to find ways round it? I suspect too much of
the analysis in the past has been a bit static: This is the market,
we make this change, then people look like that, rather than trying
to anticipate how the market itself will change."[20]
13. Verena Ross of the FSA described the liquid and
potentially hidden nature of risk as "an ongoing challenge,
certainly for financial regulation, but I suspect for regulation
generally."[21]
We agree with that comment and with its subtext, which is that
as a difficult task it might not always meet with success. However,
it is an important one so far as the regulatory objective of minimising
future problems is concerned.
14. Rick Haythornthwaite of the RRAC agreed with
this assessment.[22]
In similar vein, the Council for Healthcare Regulatory Excellence
argued for inclusion of a further objective of in the regulatory
agenda, that of "agility"a state of readiness
to respond to change.[23]
We agree that the financial crisis has demonstrated the need for
regulators to be more adaptable and anticipating.
15. However, the fact that a major cause of the most
recent crisis was an unperceived concentration of risk and that
that was an underlying factor in earlier financial problems such
as in the reinsurance market in the 1980s[24]
suggests that a more anticipative assessment of risk should be
combined with a more discerning perspective on recurring patternsone
lesson being the need constantly to be aware of the dangers of
non-apparent concentrations of risk.
16. There was also insufficient consideration of
whether risks were accruing at a dangerous level in the financial
sector as a whole. As the ICFR (International Centre for Financial
Regulation) said, "Even if risks did look manageable within
each institution, no one was paying attention to the accumulation
of these risks across all institutions."[25]
A proper application of risk-based regulation, to which we return
below, requires a grasp of systemic as well as individual corporate
risk. As the Minister put it: "I think sometimes we address
the wrong risks within regulation. One of the most difficult roles
of any regulator is to focus on the correct risks because very
often I think [they] may not be at the top of the political agenda
but
they are the most important ones."[26]
17. A further theme was that failings in effective
implementation of existing rules led to over-confidence in the
ability of regulation to do its job. As Tim Ambler and Francis
Chittenden put it, "Regulation gives only the illusion of
control if intervention is not effective."[27]
Mr. Steve Brooker of Consumer Focus suggested that regulators
be more ready to use the tools that Parliament gave them.[28]
We agree that regulation and its enforcement "should be designed
to focus on assuring overall outcomes, rather than lower level
outputs which will be more straightforward to measure."[29]
18. A prevailing criticism of the FSA approach has
been that it involved too much "box ticking" and insufficient
real understanding of underlying systems. Several underlying problems
were identified, from a lack of inside knowledge of the workings
of the regulated institutions (and hence the ability to spot danger),[30]
to problems with turnover in high-grade staff.,[31]
Sending relatively junior regulatory staff into financial sector
board rooms to try to persuade them to change approach was a tactic
doomed to failure, not least because it led to substandard compliance
discussions followed by the need to shift policies when different
evaluations were given by other personnel at a later stage.[32]
The FSA has acknowledged that it needs to up its supervisory game
and have people with the knowledge and expertise to stand up to
senior management in big firms.[33]
19. We conclude that events in the financial sector
do not require a wholesale revision of the fundamental approach
to regulation in other sectors. However, there are lessons to
be learned. Foremost among these are that regulators should:
a) seek to understand risk more fully
and develop the resources to do that, where appropriate looking
at whole systems rather than individual problem areas
b) focus more on assessing possible future risks
c) identify areas of hidden risk
d) identify possibilities of conflict of interest in taking
decisions
e) seek to anticipate unintended consequences of regulation
f) develop mechanisms for challenging prevailing wisdom and
political pressure
g) involve representatives of consumers in such challenge
h) be willing to use their powers more effectively
i) seek to match the experience and weight of those they regulate.
The BRE should support regulators in implementing
these lessons. We would encourage other Select Committees to use
these criteria in assessing the performance of regulators in their
own inquiries.
Risk-based and other models of
regulation
20. We wanted to know whether and how the financial
crisis had changed perceptions of different approaches to regulation
such as risk-based regulation. (A table explaining the meaning
of a number of terms used frequently in our inquiry is set out
on page 15.) First we looked at some misconceptions regarding
the meaning of risk-based regulation.
RISK-BASED VERSUS LIGHT-TOUCH REGULATION
21. Consumer Focus told us: "political commentary
around the need for light-touch regulation has at times unhelpfully
muddied communication about what the better regulation agenda
is actually intended to achieve. It remains in the consumer and
public interest to have the right amount and type of regulation
but no more."[34]
22. Light-touch regulation has justifiably been criticised
for exhibiting the failings outlined in the section of this Report
on lessons from the financial crisis, but we do not believe that
that should detract from a proper application of risk-based regulation,
based on the right intelligence and on proportionate responses.
In evidence, there was general agreement that risk-based regulation
was not of itself a cause of the financial crisis, although the
application of a risk-based approach had been faulty.[35]
Several witnesses agreed that risk-based approaches should not
be confused with light-touch regulation.
23. Sarah Veale of the TUC told us: "I think
the principle of risk-based regulation
was not what did for
the financial sector."[36]
Steve Brooker from Consumer Focus said:
"risk-based" regulation remains a valid
approach. Put at its simplest terms, all it means is that you
allocate your scarce resources to where you think the harm is
most likely to occur and if that is to be successful that depends
on having the right intelligence in place. I do not think the
FSA had the right intelligence in place and got its risk assessment
wrong. What I would not do is equate risk-based regulation with
light-touch regulation."[37]
He added:
"Once you have identified your risk then
you decide on the firmness of your touch. On some occasions a
feather light touch is the order of the day but at other times
a vicelike grip is what is needed. What we see at the FSA and
other regulators is too much light touch and not enough firmness
in their approach."[38]
Stephen Haddrill of the ABI similarly contrasted
risk-based and light touch approaches, saying: "When we talk
about risk-based, what it means is really understanding that risk
in depth. That is not a light-touch option and it can be done
very effectively."[39]
24. There will remain instances where a light touch
to regulation is entirely right, but there is a need also to be
intrusivethe vicelike gripin the areas of greatest
risk.
25. In future, analysts and commentators must
avoid confusing risk-based regulation and so-called "light-touch"
approaches. Risk-based "right-touch" regulation remains
a valid approach provided there is: (a) diligence in understanding
risk; (b) a willingness to accept some degree of failure (albeit
that in certain sectors there must be maximum effort to eliminate
failure); (c) an awareness that risk assessments, with their tendency
sometimes to lead to a false sense of security, should be subject
to appropriate challenge; and (d) the willingness to be intrusive
rather than light-touch when appropriate. At this stage
in the debate, better balance is required in order to ensure an
effective delivery of the regulatory reform agenda. The BRE should
have a role in promoting to the business world an approach to
better regulation that incorporates those principles.
Regulatory Models
Risk-based regulation attempts to focus regulatory effort at the place of maximum effect in avoiding the worst outcomes for the greatest numbers (or conversely, promoting the most desirable results for the greatest numbers), and allocates resources accordingly. If rigidly imposed, however, it can be criticised as requiring calculated decisions about what can be sacrificed.[40]
Principles-based regulation takes a high-level approach to making rules and has the virtue of brevity. European competition law is an example. Instead of regulating what can or cannot be said in a contract, it looks at the overall effects of contracts and makes them illegal if the effect would be to prevent or distort competition. Principles-based regulation is difficult to circumvent, but exceptions usually need to be allowed for, and if exceptions are not clear or are left unstated the principles themselves can be hard to interpret and apply, leading to uncertainty.
Rules-based regulation works on detailed rules. It has the advantage of clarity, but its disadvantage is its inability to adapt quickly to circumstances. In seeking to be a comprehensive about what is or is not allowed, it can provide a routemap to potential circumvention. By definition, it tends to be lengthy.
Outcomes-based regulation is what the FSA has indicated it intends to move to.[41] It is an adaptive and pragmatic approach that mixes different types of regulatory approach based on the aim of regulating in a way that works. It could be argued, however, that that is the aim of all regulation.
|
26. The value of work done by the Risk and Regulation
Advisory Council in contributing to a sensible discussion of regulatory
issues has been recognised by, for instance, the Work and Pensions
Committee[42] andin
our inquiryby the ACCA[43]
and the TUC.[44] The
Council's final paper, 'Response with Responsibility' recommends
establishing an independent Public Risk Commission inter alia
to identify disproportionate regulatory responses to risk, stem
regulatory creep, challenge risk-mongers and help Government manage
responses to risk under pressure. Given the findings of in this
section of our Report, we think that a body to review such issues
could be valuable, provided of course that it was itself appropriately
lean. The Minister indicated that the Government are actively
considering the idea, although there was a question mark over
whether such a function could instead be taken on by an existing
organisation.[45] The
Minister's letter of 13 July 2009 to the Committee Chairman attached
terms of reference for the Regulatory Policy Committee[46]
in which the latter is invited by the Government to comment on
"the degree to which issues of public risk and the practicalities
of ensuring compliance are taken into account."[47]
This we duly note.
27. We recommend that the Government implement
the Risk and Regulation Advisory Council's proposal for a body
to challenge excessive regulatory responses to risk either by
way of the RRAC's own proposal for a Public Risk Commission or
through charging an appropriate existing body with that responsibility.
PRINCIPLES VERSUS RULES-BASED APPROACHES
28. There was a much wider spectrum of views on principles-based
regulation than in other areas of our inquiry. The FSB was not
convinced of the merits of a principles-based approach, saying
"it is clear regulation that we are looking for."[48]
The IoD (Institute of Directors) commented that small businesses
value clarity over esoteric principles.[49]
(There is, of course, no intrinsic reason why a principle should
be esoteric; however, the point is taken that even carefully designed
principles can require interpretation. The Ten Commandments are
a case in point!) Citizens' Advice (CAB) articulated the consumer
case against principles-based regulationthat if applied
in a light-touch manner it allows firms to decide what the principles
mean and causes disagreements of interpretation between advisers
and businesses.[50] In
a helpful supplementary paper Which? also expressed reservations
based on concerns around ambiguity and the need for judicial interpretation.[51]
29. On the other hand, EEF told us that principles-based
approaches are more adaptable than detailed rules, and the Local
Better Regulation Office (LBRO)[52]
likewise commented on the value of principles in "future
proofing".[53] Andrew
Tyrtania, an ex-practitioner in financial services, was firmly
in favour of principles-based regulation.[54]
His view was that the crisis is "the first real test of principles-based
regulation and a wake-up call to the senior management of financial
services firms that they have not properly understood and acted
on their obligations under the Principles."[55]
Consumer Focus's view was that the principles-based approach adopted
in the FSA's "Treating Customers Fairly" programme[56]
had not been given a fair chance to get started.[57]
It said: "we remain of the view that a principles-based regime
has a better change than writing detailed rulebooks of changing
the behaviour of financial firms as it seeks to tackle the underlying
problems"[58]
30. Steve Brooker of Consumer Focus said:
"lack of certainty is certainly a danger
of principles-based regulation but what happens when everything
is certain is that compliance departments within banks and other
financial institutions regulate in an unthinking way through the
tick box mentality. What attracts me about principles-based regulation
is that it gets senior executives within financial firms to actually
think about what they need to do to deliver compliance
".
[59]
He was also clear that it was not the cause of the
financial crisis.[60]
We did not hear any contrary view.
31. Which? was much more ambivalent about the success
and likely future success of "Treating Customers Fairly".[61]
Its view was that "principles-based regulation will only
be effective if companies who fail to live up to regulatory standards
suffer damage to their reputation and bottom line including naming
and shaming and tough enforcement action towards transgressors."[62]
Furthermore, Rick Haythornthwaite questioned whether board-level
management gives sufficient attention to compliance, arguing that
that often leads to delegation to lawyers and compliance officers
whose tendency is to turn a principles-based regime into a rules
based one "which decreases the potential for that system
to be able to sense the
shifts in culture and tone that we
[are talking] about." We take the point, but it seems to
us that boards will take responsibility for internal compliance
when the right enforcement regime exists as an incentive for them
to do so, as has been the case with competition law.
32. A number of witnesses sought to resolve the tension
between different regulatory approaches in favour of considering
outcomes, as currently favoured by the FSA.[63]
For example, the ABI said: "making sure that the mixture
of principles and rules, backed by sanction, delivers high quality
consumer outcomes remains the role of the regulator."[64]
CAB said that "
regulators should be more focused on
the outcomes of their regulatory frameworks."[65]
The TUC said: "We do not see that outcomes-focused regulation
is an alternative to principles-based regulation; ideally the
two should work together. If the principles are understood and
proper guidance and support is available the outcomes should generally
be good."[66] The
Trading Standards Institute ("Trading Standards") advocated
a "proportionate matrix between principles-based legislation
and prescriptive law."
33. Which? summed things up well. It said, "it
is not sensible, or indeed safe, to take an overly ideological
approach to regulation"[67]
and "regulation should be about what works and
what
is fit for purpose and what adequately deals with the risks that
are in front of us."[68]
The BRE articulated an equally sensible and pragmatic view of
how the balance between models should work:
"Principles-based regulation focuses both
regulators and the regulated on delivering against regulatory
objectives. This avoids regulation becoming an exercise in purely
'going through the motions' or 'box-ticking'. Current principles-based
regimes combine specific rules and general principles. The BRE
believes that creating this balance is the correct approach and
will continue to help ensure that this is the case. It is essential
that clear guidance is provided, where appropriate, to assist
those regulated in understanding what is required in order to
comply with regulation."[69]
34. We believe that principles-based models of
regulation based on promoting right outcomes can have value in
promoting simpler and stronger rules. There is no reason why clear
fundamental principles cannot overlie well-designed and helpful
structures of supporting rules and guidance, with both being appropriately
and proportionately enforced. The BRE and/or the Regulatory Policy
Committee[70]
should have a role in determining the frameworks of regulation
that are appropriate in individual instances.
Consumers and representation
35. The conclusion of our last report mentioned our
doubts about the extent to which the citizen in general is considered
in relation to better regulation.[71]
This month, the Government published its White Paper, 'A Better
Deal for Consumers',[72]
but we believe there is an opportunity to go further. There is
need and scope for involving consumer and end user in regulatory
mechanisms, not only as a means of protecting the interests of
such groups but to provide independent challenge and feedback
on the quality of regulation. For instance, it seems to us that
warnings intended to protect consumers against financial exposure
have not worked, and that one reason for that is an excess of
"one size fits all" advice with a lack of targeted assessment.
Greater consumer involvement would be a way to avoid that pitfall.
36. The CAB's written paper supported that broad
position when it said: "regulation to date, whether principles-based
or rules-based, has not understood and protected consumers and
employees sufficiently."[73]
CAB argued for a clear strategy to gather evidence of consumer
experience, with the experience then being employed to review
the effectiveness of regulatory frameworks.[74]
It pointed in particular to the need for regulators to encourage
consumers to give feedback, communicate the outcome of that feedback,
and provide consumers with sufficient and timely information about
their investigations.[75]
The same theme was taken up by Consumer Focus, whose witness in
oral evidence commented on the lack of consumer representation
on the FSA board following the resignation of its Consumer Panel
Chair, and on the lack of consumer research at the FSA according
to Consumer Focus's 'Rating Regulators' study.[76]
37. Consumer Focus told us: "Perhaps one explanation
for why the FSA failed is the absence of external perspective
to challenge the received wisdom. Our perception is that both
industry and the FSA framed the issues in the same waythey
might have disagreed on points of detail, but the way they thought
about things was the same, with catastrophic results." Steve
Brooker of Consumer Focus said, "I think if there had been
more balanced perspective at the FSA we might have seen a slightly
different story." The FSB expressed a similar view, saying
"there is always a danger of the regulators being too close
to the market that they are dealing with."[77]
That also suggests that alignment between regulators and those
regulated, while it has value,[78]
should always be tempered with caution against the risks of excessive
proximity and insufficient outside challenge.
38. At the least, there is an opportunity to provide
more intelligible advice for consumersespecially when purchasing
financial productsby involving them in the decision-making
process about guidance and warnings. But there is scope to go
further. As Consumer Focus pointed out, greater consumer involvement
could also provide an opportunity to re-energise the better regulation
agenda by providing greater diversity of perspective.[79]
It could provide a means to inject greater opportunity for external
challenge to established patterns of thinking. The Minister
agreed that regulators should involve consumers in policy formation.[80]
We therefore encourage regulators to seek more active consumer
and/or end user involvement, including at board level, and we
recommend that the Better Regulation Executive should arrange
specific measures to allow for consumer and end user feedback.
Governance and accountability
39. Amid all the analysis of how to improve the performance
of regulators, the need for better governance within those being
regulated should not be forgotten. Sir William Sargent told us
that responsibility starts with governance structures and boards,
and that "a regulator cannot possibly be everywhere at all
times
no matter which part of the economy you are in."[81]
There is a responsibility to monitor risk at the level of governance
and audit and apply the brakes where necessary despite the pressure
of financial incentives. As the ACCA told us, "those who
take ownership of risk need to be both able and inclined to override
income generators." The ICFR notably and succinctly said:
"Some reason for the regulated to comply must exist,"[82]
which is as much a matter of internal governance and challenge
as about external regulatory control. We agree that there should
be more effective mechanisms for internal and shareholder scrutiny
within organisations particularly, and we urge the current Walker
review of governance to consider that in light of its more extensive
researches.
40. Clive Davenport of the Federation of Small Business
commented on the need for accountability to an independent tier
as a solution to regulators becoming too close to the market they
are dealing with[83]
and Tim Ambler of the London Business School called for greater
accountability of bodies such as the FSA to Parliament and more
independence from Government.[84]
In fact, given that the FSA is funded by the financial sector
it might be argued that greater independence from that sector
is needed before greater independence from Government. However,
at a general level these comments reinforce the value of strategic-level
outside scrutiny by bodies such as the National Audit Office[85]
and the Treasury Committee.
Implications for the Better Regulation
agenda
41. There are misgivings about extent of progress
and about perceptions with Better Regulation, which we address
in Section 3. Despite that, we believe that the aims of the Better
Regulation agenda remain valid notwithstanding the fallout from
the financial crisis and can accommodate the interests of business
and the citizen. Sir William Sargent summed it up: "Better
regulation principles are particularly critical at this time,
so I would be very worried if people felt that this is all about
being good to business and not looking after citizens. They are
completely compatible principles are far as I am concerned."[86]
As he put it, the challenge is to carry on being good and better
at regulation.[87]
42. The Better Regulation agenda remains a valid
project whose aim should be to improve regulatory outcomes for
the whole of society. There remains a need to improve results
in a way that profoundly shifts perceptions. It seems to us that
the BRE needs to develop a stronger role in evaluating how a more
sophisticated Better Regulation agenda might best be delivered.
2 Q3 Back
3
Q105 Back
4
For example, see Ev 81ff Back
5
For example, Q72 Back
6
Q43 [Mr Houghton] Back
7
Q61 [Mr Haythornthwaite] Back
8
For example, "We have had 450 pages from the FSA, but they
do not add up to very much. What they fail to recognise is that
we have not witnessed a failure of regulation but a failure of
regulators." (Q61[Ambler]) Back
9
Ev 198 Back
10
http://www.fsa.gov.uk/pages/Library/Corporate/turner/index.shtml Back
11
Ev 84, submitted Feb 2009 Back
12
Q67 [Mr Haythornthwaite] Back
13
Ev 104 Back
14
Q3 [Sir William Sargent] and Q5 [Mr Kohli] Back
15
Ev 104 Back
16
Ev 101 Back
17
See Q36 to Q 38 [Mr Brooker and Ms Veale] Back
18
Ev 84: "Failures will sometimes occur and do not necessarily
mean that the system is inappropriate." Back
19
For example, Avinash Persaud, Turner Review discussion day, 27
March 2009 Back
20
Q109 [Mr Haddrill] Back
21
Q100 Back
22
QQ65 and 67 [Mr Haythornthwaite]; see also Ev 182 Back
23
Ev 182 Back
24
Specifically, the problems at Lloyd's arising from the Piper Alpha
disaster Back
25
Ev 203; See also Q63 [Mr Haythornthwaite] Back
26
Q136 [Ian Lucas MP] Back
27
Ev 77 Back
28
Q31 [Mr Brooker] Back
29
Ev 84; likewise Ev 104: "Compliance does not equal the absence
of risk." Back
30
Q17 Back
31
Q16 Back
32
See our comments in paragraphs 46 and 47 on the need for useful
guidance and for regulators to find ways to stick their necks
out when consulted by the management of those they regulate. Back
33
Q94 Back
34
Ev 31 Back
35
As well as the references cited below, see, for example: Ev 54
paragraph 8.2, Q1, Q112 [Mr Salomone] Back
36
Q38 Back
37
Q34 Back
38
Q35 Back
39
Q114 Back
40
In its supplementary written evidence to us (see Ev 175), the
OFT listed the following as factors in a risk-based assessment
of whether to take regulatory action: "the likely effects
on
consumer welfare,
strategic significance
, the likelihood
of a successful outcome, and the OFT's resources." Back
41
Turner Review discussion paper, paragraph 1.64 Back
42
Third Report of 2007-08 Back
43
Ev 105 Back
44
Ev 57 Back
45
Q156 Back
46
See paragraph 56 Back
47
Ev 250 Back
48
Q69 [Mr Davenport] Back
49
Q69 [Mr Ehmann] Back
50
Q32 [Ms Edwards] Back
51
Ev 72 Back
52
Ev 245 Back
53
A term actually used by Which? See Ev 72 Back
54
Ev 142 Back
55
Ev 141 Back
56
http://www.fsa.gov.uk/Pages/Doing/Regulated/tcf/index.shtml Back
57
Ev 32 Back
58
Ibid Back
59
Q33 [Mr Brooker] Back
60
Q32 [Mr Brooker] Back
61
Ev 73 Back
62
Ibid Back
63
Turner Review discussion paper, paragraph 1.64 Back
64
Ev 102 Back
65
Ev 39 paragraphs 5.1/2 Back
66
Ev 75 Back
67
Ev 47 Back
68
Q31 Back
69
For the full description see Ev 121, response 2 Back
70
See paragraph 56 Back
71
'Getting Results' paragraph 102 Back
72
http://www.berr.gov.uk/whatwedo/consumers/consumer-white-paper/index.html;
Cm 7669 Back
73
Ev 34, paragraph 1.5 Back
74
Ev 39, paragraph 6.1 Back
75
Ev 39, paragraph 6.2 Back
76
'Rating Regulators' Executive Summary, page 27; http://www.consumerfocus.org.uk/en/content/cms/Publications___Repor/Publications___Repor.aspx Back
77
Q64 Back
78
QQ131 and 146 Back
79
Ev 31, paragraph .14 Back
80
Q130 [Ian Lucas MP] Back
81
Question 16 Back
82
Ev 204 Back
83
Q64 Back
84
Q65 [Mr Ambler] Back
85
The NAO does not normally have powers of audit over the FSA because
the FSA is not a Government-funded body Back
86
Q7 Back
87
Q28 [Sir William Sargent] Back
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