FSA chief executive John Tiner has issued a fierce response to criticisms of the watchdog from a leading think tank.
The Centre for Policy Studies sent a damning letter to the FSA slating it regulatory stance.
In response Tiner said: “The UK financial services industry continues to flourish and has consolidated its position as the world leading international financial centre.”
He said the FSA was “sensitive” to the industry concerns about regulation and had set to work a number of initiatives to combat those concerns.
Tiner defended the FSA's position. He said: “We believe that efficient markets are the best means of providing benefits to both industry participants and their customers.
“That's why, where we have discretion, which is limited where we are required to implement European legislation, we intervene only where there is a market failure and where regulatory intervention is likely to be cost-effective. We take a risk-based approach which accepts that some failures neither can nor should be avoided."