Historic errors replaced with intensive supervisory approach

The Financial Services Authority (FSA) has said the Treasury Select Committee has acknowledged that the FSA has spotted and corrected its historic mistakes and companies know it.

Responding the committee’s report, the FSA said: “The FSA has changed radically since it published an internal review in early 2008. A series of operational and philosophical reforms, including the supervisory enhancement programme, have created a sustainable approach to financial services regulation.

“This new approach is based on an integrated risk assessment of prudential and conduct risk and is designed to be effective in all economic circumstances.”

Expert judgements

The FSA said its new intensive supervisory approach is about making judgements on what might happen in the future - boom or bust - rather than acting solely on observable facts.

“We are using these expert judgements to test the robustness of firms' business models, their governance framework and to assess whether individuals are fit to run them - regardless of their individual qualifications,” it said.

The FSA will respond in full to the report later.