Will Hector Sants really leave the FSA house in a fit state?

Hector Sants will at least have something to tell his grandchildren. Sants’ tenure has surpassed his and all others’ expectations at least in terms of what a roller coaster it has been.
His legacy has to be rated on two fronts – first as a firefighter in a huge economic crisis. In that sense, I think Sants and Adair Turner have done as well as anyone could expect.
The second question is how well they have set up the regulator for future challenges. Sants himself believes he has done well and I am pretty sure that the FSA as of today would not be caught out in such a horrendous way as the FSA was in the last few years. By this I particularly mean Northern Rock and HBOS – there was more showing above the water. But I would hope the FSA today might ask RBS of old what it was up to and indeed exactly what was clearing through AIG’s London office too. Yet I’m not quite sure that is the end of the story.
Clearly Sants is leaving at least partly because it looks likely his organisation is to be broken up.
He probably believes the organisation would be set fair for the future if only the Tories were to rethink their policies.
If that is the case, I really couldn’t agree. Something went wrong culturally with the organisation, in terms of intelligence gathering about the market, in terms of its priorities, in terms of how it functioned. Treating customers fairly, a useful concept, became something like a gospel truth to be obeyed at all cost. It fought the last war over and over again, and in seeking some sort of IFA and insurance company perfection it managed to miss most of the extraordinary excess of the mortgage market and mortgage banks. This is less the regulatory equivalent of fighting the last war as not even bothering to check out exactly what the explosions are that you can hear over the next ridge.
So on that front, I wouldn’t agree with Sants. I am also not sure if an ‘internal’ change is all that is required. There should be a parliamentary, industry and consumer review into what exactly constitutes a good regulator and perhaps it is only the Tory plan that offers this.
In Sants’ case his departure, according to plan or not, is perfectly understandable. But when it is settled the new chief should probably be encouraged to do a stint closer to the typical Bank of England Governor. Three years really isn’t enough.

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3 Responses to “Will Hector Sants really leave the FSA house in a fit state?”

  1. avatar Alan Lakey says:

    What is Hector Sants legacy?

    Being charitable I could say that he was so preoccupied with the banking crisis that he ignored the ministrations of the IFA sector when they shouted that they were being treated unfairly in comparison to the banks and that the RDR was a disaster looming ever closer on the horizon.

    Were I bountiful with my comments I might say that he successfully steered the good ship FSA into calmer waters when other captains might have jumped into the dinghy.

    The truth is that from a practitioner’s standpoint he has continued with the unappetising agenda of his tiny predecessor. He appears to have little understanding of the retail sector although in recent months he has been undertaking worthwhile research (something that might be futile given his resignation).

    Never in 22 years of regulation have I known such contempt and disgust with a regulator. The FSA is a body that either fails to listen or, alternatively, chooses to hear only those voices chanting their favoured mantra. The us and them divide has never been wider and Hector Sants tenure has served to highlight this far more graphically then with previous regimes.

    Will his successor be more pre-disposed towards advisers? As the decisive vote is with the Treasury I guess we can all guess the answer to that one.

  2. avatar Nikki Turner says:

    In recent weeks I have received conflicting messages from the FSA with regards to HBOS and specifically to the HBOS Reading scandal. On the one hand, Hector Sants has confirmed the FSA are taking the matter very seriously – on the other hand, FSA staff have belittled the whole affair and tried to minimise any investigation (even although it was requested by a Treasury Minister and 8 MPs at a Debate in Westminster).
    Eight months on from the Debate it is astounding to the many victims of HBOS Reading that someone in the supervision department of the FSA has been able to undermine everything Hector has said in the last few months. Consequently, I’m not surprised he is leaving. I don’t think the FSA is unanimous on its remit and, given it is funded by the banks, I imagine they are still calling the tune.

  3. avatar John Blackmore says:

    I have no idea how well the FSA will cope with large scale disasters in the future. Hopefully some lessons will have been learned from Northern Rock et al ?

    At the Adviser level I can only see 23 years of very expensive wasted effort. The focus of FIMBRA, the PIA and more recently has been almost exclusively on regulating the advice/sales process. There has been a complete failure to realise that in the majority of cases it is the products that cause the problem and that for the mass market (95% of the market) products need to be regulated – not to provide best advice, but to avoid disaster.

    Although I have recently seen glimmers of realization from within the FSA I would have to say that with TCF and RDR Hector has left the house still moving in the wrong direction. Dust off the Sandler report and get regulating the products. Stop wasting time of fees v commission, qualifications and public education and just require products that are fit for purpose – and then let anyone sell them . the savings/protection gap could be closed within months and 10’s of millions saved on not regulating the advice process.