Speaking at the Compliance Institute Annual State of the Nation Conference, Clive Briault, managing director of retail markets at the FSA, emphasised the importance of principles-based regulation and reiterated its desire to adapt the approach over the coming months.
He said: “What happened with Northern Rock does not mean principles-based regulation is flawed.
"Indeed, we believe that a full analysis of the events will support our principles-based approach to regulation, and in particular the importance of both us and firms’ management focusing on the consequences of their actions rather than rigid adherence to detailed rules.
"As we have already acknowledged publicly, there were supervisory failings in relation to Northern Rock and we are already addressing these.
"We will also examine carefully any further lessons that emerge from our internal review of the supervision of Northern Rock. We will be publishing the conclusions of that review in March.”
However, Alan Lakey, senior partner at Highclere Financial Services, said: “Principles-based regulation gives the FSA the power to do what it likes.
"It is uncertain if principles would have changed the Northern Rock situation, but with principles there are no detailed parameters.”
A broker, who wished to remain anonymous, added: “Principles based would not have impacted on Northern Rock; it was its own lending practices that got it into trouble.”
