Speaking at the FSA annual public meeting, John Howard, chair of the consumer panel admitted the panels’ concerns over the move to a principles-based approach to regulation, specifically the increased guidance that may follow from various trade bodies.
He said: “The consumer panel has concerns that the FSA, in its move to a principles-based approach, could lead to trade bodies and other organisations publishing guidelines on how best to act in the new environment. What is the point of a principles-based approach if guidelines are then given on how best to interpret the guidelines.”
Mark Rothery, chair of the smaller business practitioner panels, agreed the FSA must give time for the interpretations of a principles-based approach to sink in. He said: “There is a concern by some people that a principles-based approach could be a Trojan horse. The FSA must give a suitable length of time for firms to fully implement the changes that they will have to undergo to satisfy the principles-based approach to regulation.”
However, Roy Leighton, chairman of the practitioner panel, suggested the move to a principles-based approach would benefit the whole financial sector. He said: “Moving to a principles-based approach is pioneering work, but it will encounter teething problems. As a result of moving towards principles, individuals involved in compliance may see it that they, to start of with, are ‘getting it in the neck.’ As a result of moving away from rules to principles, supervisors must be sufficiently skilled to look at the risks. There must be a collective effort to endorse the ethics of a principles-based approach.”
