A prospectus from the FSA: Its approach to regulation
| Published date | 01 April 1998 |
| DOI | https://doi.org/10.1108/eb024981 |
| Date | 01 April 1998 |
| Pages | 305-312 |
| Author | David T Llewellyn |
| Subject Matter | Accounting & finance |
Journal of Financial Regulation and Compliance Volume 6 Number 4
A prospectus from the FSA: Its approach to
regulation
David T Llewellyn
Received: 14th September, 1998
Department of Economics, Loughborough University, Loughborough, Leicestershire LE11 3TU;
tel:
01509 222700; fax: 01509 223910; e-mail: D.T. Llewellyn@lboro.ac.uk
David Llewellyn is Professor of Money and
Banking at Loughborough University and
serves as a Public Interest Director of the
Personal Investment Authority. He is a
member of the International Advisory
Boards of the Italian Bankers Association
and NCR Corporation, and is a member of
the Council of Management of Société Uni-
versitaire Européenne de Recherches
Financières. He has researched and
writ-
ten extensively on the theory and practice
of financial regulation and the operation of
financial institutions and markets.
ABSTRACT
The Bill gives the FSA substantial
discretion
in
the way its powers can be exercised. A key
issue for a financial regulator relates to the
selection it
makes
from the range of
instruments
available and the way they are combined in an
overall regulatory strategy so as to achieve
objectives effectively and efficiently. The object
of this paper is to review a policy document the
FSA has
issued.
This document indicates how
the FSA plans to evolve its
approach
to regula-
tion.
One of the particular
challenges
for the
FSA will be to get the balance right between
harmonisation and differentiation.
INTRODUCTION
The draft Financial Services and Markets
Bill formalises the new institutional struc-
ture for financial regulation and confers
very substantial power on the Financial
Services Authority (FSA). In terms of
scope and power, the FSA will become the
most powerful and all-embracing financial
regulator of any country. The paper 'Prin-
ciples of effective regulation and supervi-
sion of banks', also in this issue, argues that
what really matters is not so much institu-
tional structure, or even the formal powers
of a regulator, but the style, approach and
conduct of regulation as applied in practice.
As well as conferring substantial powers,
the draft Bill also gives the agency very
substantial discretion in the way its powers
can be used. In some respects, the way that
this discretion is used will prove to be
more significant than the Bill
itself.
This,
in turn, emphasises the importance of the
accountability mechanisms of the FSA and
of the FSA being open in the way it plans
to develop its regulatory regime.
REGULATORS HAVE CHOICES
A regulator faces many choices in the con-
struction of its regulatory regime and in
four dimensions in particular: (1) how vig-
orously it chooses to pursue its objectives;
(2) over the degree of regulatory intensity
and the degree of prescription and inter-
vention; (3) over the choice and combina-
tion of regulatory instruments in the
overall strategy; and, (4) with respect to
the degree of consistency or differentiation
Journal of Financial Regulation
and Compliance, Vol. 6. No. 4,
1998,
pp. 305-312
© Henry Stewart Publications,
1358-1988
Page 305
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