Speaking to the British Bankers Association, Verena Ross, director, strategy and risk at the FSA, admitted that while principles-based regulation was not incompatible with EU law, the regulator needed to be given the scope to implement its measures how it saw fit.
Ross also insisted that regulators were better at reacting to changes in the market and adapting without the need for EU directives.
She said: “We believe that European Community law is not in itself incompatible with our more principles-based approach. Directives are an example of principles-based regulation since they are, or should be, high level and outcome focused, and leave the FSA sufficient scope to determine how the objective is to be achieved.
“But we believe that legislators need to keep a focus on ultimate outcomes and key principles, not only because we – as a national regulator – are keen to maintain some flexibility, but because we see a danger in such detailed directives being quickly overtaken by market events and thus reducing the ability of the European capital markets to be as innovative and competitive as they can be.”
Andrew Strange, policy analyst at the Association of Mortgage Intermediaries, said: “Ross is right as directives allow a certain amount of freedom of interpretation. However, there are other areas where they are stricter so I think her comments are right on the money.”
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