Themes and Trends in Regulatory Reform - Regulatory Reform Committee Contents


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 patterns—one 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 intrusive—the vicelike grip—in 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] and—in our inquiry—by 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 regulation—that 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 way—they 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 consumers—especially when purchasing financial products—by 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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