The review will start immediately and is expected to have been completed by the end of the year.
The NAO will look at the FSA’s cost-efficiency, management and its role in fighting financial crime. How well the FSA matches its resource allocation to its identification of risks to its objectives will also been scrutinised. The NAO will also explore whether its processes can be improved.
Announcing the review at the Smith Institute, Ed Balls, Treasury Minister, said: “We are right to avoid prescriptive, heavy-handed regulation in Britain. While it is the Bank of England’s independence that is often cited as government’s most significant financial reform, the establishment of the FSA has been just as important.”
Despite criticism from the industry over the amount of red tape the introduction of the FSA has created in the financial services sector, the treasury has stressed that the review has always been planned.
Commenting, Robin-Gordon-Walker, spokesperson for the FSA said: “This review was always scheduled to take place and will look at the effectiveness of our operations. It has nothing to do with how we regulate the industry and instruct policy.”
The FSA’s chairman, Sir Callum McCarthy, also spoke at the Smith Institute. He outlined three key challenges facing the future of financial regulation. These were how to respond to increasingly international financial institutions, how to become a more principles-based regulator and how to retain the FSA’s focus.
He said: “The FSA will always have a combination of detailed rules and general principles. That is inevitable. But we are determined to first halt and then reverse the growth in rules and replace, whenever we can, detailed rules with general principles. It is clear that this move has quite profound implications both for the FSA and for those we regulate.”
