FSA calls for tougher regulation of financial companies

29 January 2010

The Financial Services Authority (FSA) has called for more stringent rules to be introduced to regulate the ways banks and financial firms are run.

According to a consultation paper, the industry regulator is to undertake greater scrutiny of senior management roles and staff carrying out significant influence functions (SIF).

Listed banks and insurance companies need to employ senior professionals as chief risk officers and set up risk committees, the FSA advised.

Graeme Ashley-Fenn, FSA’s director of permissions, decisions and reporting, said: "Our more intrusive approach continues to place a great deal of emphasis on governance and therefore the senior management at firms.

“This starts with a firm’s own due diligence. Our experience shows that once a firm gets its corporate governance right; with a strong and effective board, everything else flows from that."

Further action from the FSA includes implementing a new framework of controlled functions to provide greater clarity to job roles.

The new system should make it easier for the performance of post holders to be analysed, the regulator explained.

Consultation on the paper is expected to finish in April 2010 with proposals due to be finalised by the third quarter of the year.

By Jim Ottewill

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