Financial Regulatory Forum

UK’s top financial regulator quits

By Reuters Staff
February 9, 2010
Summer departure

Summer departure

By Kirstin Ridley and Clara Ferreira-Marques

LONDON, Feb 9 (Reuters) – Britain’s top financial regulator announced he was to step down, surprising markets and casting doubt over the future of the Financial Services Authority and an overhaul of the sector.

Hector Sants, a former investment banker well-respected in the industry, will leave the FSA just after a general election widely expected to leave the opposition Conservatives in power.

The Conservative Party, a long-time leader in opinion polls, has said it wants to abolish the FSA and hand its banking supervisory powers to the Bank of England, saying the regulator failed to spot problems ahead of the financial crisis and was unable to avert a costly bailout.

Sants, who will leave in the summer, said he had always planned to hold the post for three years. Industry insiders said he has been talking to colleagues about his departure for some months.

But the FSA did not outline a succession plan on Tuesday and said the process for picking a successor would be announced “in due course”. It remains to be seen whether Sants could be tempted to join a reshuffled regulator at a later date.

“It comes as a surprise, but the air of uncertainty hanging over the FSA is presumably a major factor in his decision,” said Ben Kingsley, a partner at London law firm Slaughter and May.

“What I think could now be more concerning is the effect this resignation may have on morale and concentration more generally at the regulator. The FSA had reportedly been struggling to retain existing talent, and to attract more; this will doubtless not help.”

Sants took over in July 2007 and has steered the FSA through the most testing times since its creation a decade ago.

Britain’s tripartite system of regulation — which splits responsibilities between the FSA, the BoE and the Treasury — is widely seen to have failed in the run-up to the crisis, and the FSA itself has acknowledged mistakes.

Sants, however, has publicly criticised plans to overhaul the country’s regulatory system at a critical time, warning it could mean losing lessons learnt over the past two years.

BE AFRAID

Several industry observers paid tribute to the well-respected Sants, whose warning to bankers last March — “be afraid, be very afraid” — ruffled the feathers of a once powerful industry, and warned banks against any collective sigh of relief at his departure.

“It’s a shame – Sants carried the can for failures at the FSA, but he did plenty of good stuff too,” said James Perry, a partner at law firm Ashurst.

“In some ways, he was an “old-style” appointment; in the post-Lehman world, we can expect a new leader who will take a more hard-nosed line with the market. And anyone who thinks that none of this will matter if the Conservatives win is dreaming.”

Sants joined the FSA from Credit Suisse First Boston in 2004. Well-liked and respected in the industry, he rose from head of the regulator’s wholesale and institutional markets division to take the helm three years later.

Sants has not given the FSA a specific departure date and is expected to work with the regulator to ensure a smooth handover.

Possible successors to Sants are unlikely to come from outside the regulator, with front-runners currently tipped as Sally Dewar, tough-talking head of the regulator’s Risk Business Unit, and Jon Pain, head of supervision. (Reporting by Kirstin Ridley and Clara Ferreira-Marques; Editing by Louise Heavens) ((clara.ferreira-marques@reuters.com; +44 207 542 3214; Reuters Messaging:

rm://clara.ferreira-marques.reuters.com@reuters.net))

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