FSA chairman, Sir Callum McCarthy, said the increasingly international nature of financial services required the clarification of the responsibilities of home regulators – the regulator of the country where a financial institution is incorporated – and host regulators – the regulators of countries the business has branches or subsidiaries in but not headquarters.
McCarthy said: “We need to develop a regulatory approach which recognises realities, not one based on the simple nostrum that any financial institution should be supervised pretty much exclusively by the home country supervisor, with the host regulators in other countries losing the scope to challenge the analysis and decisions of the home regulator or to act independently of them. I do not believe this is a real solution.
“We need to establish a clearer and better understanding of the duties and rights of both home and host regulators, and devise working methods to make those operational.”
McCarthy said the issues of differing legal powers and resources between regulators, and the degrees of political independence a regulator had were not being addressed under the home country model.
Richard Sexton, business development director of e.surv, said: “A lot of lenders would welcome this, as many are active in foreign markets and it must be a challenge reacting to differing legislation. Country boundaries are becoming more artificial as businesses operate across them. The expectation is of greater integration – the more standardisation, the better.”
