A full transcript of Prospect's interview with the FSA chairmanby Bronwen Maddox / December 14, 2011 / Leave a comment
Published in January 2012 issue of Prospect Magazine
Prospect‘s editor Bronwen Maddox and deputy editor James Elwes interviewed Financial Services Authority chairman Adair Turner in November. They discussed the financial crisis, regulation and the break-up of the FSA.
PROSPECT: Is it the right time to be breaking up the FSA, now that everyone has got used to it?
ADAIR TURNER: My belief is that the endpoint of the reform will be better than the existing FSA. I always had an inkling even before I took the job that the spread of the FSA’s responsibility from the prudential regulation of large banks through to the conduct regulation of 20,000 Independent Financial Advisers and general insurance brokers was a very wide span which went across activities which had a different nature, a different skill-set and different logical links.
So I am actually a believer that the prudential regulation of banks in particular but also shadow banks has a natural overlap with central banking activity and should be combined with the central bank. Insofar as I had an inkling, I always believed that, years ago, and I increasingly became convinced of that over the first few years that I was here, which was very clearly against FSA institutional belief at the time. So I am a supporter, and I think it was pretty clear even before the election that I was a supporter of that general direction.
In an ideal world, we wouldn’t be doing this change in the middle of the biggest financial crisis in the world. So it’s not so much that you asked the question, “should we be doing it given that people have got used to the FSA?” I don’t think that would be a good argument against not doing it, but in an ideal world I would not choose to be doing this amid the biggest financial crisis, because an organisational divide takes up a lot of top management time thinking about people, premises, systems, lots of nitty-gritty things. We had a board away day of the FSA board two weeks ago of the FSA board, which was entirely devoted to all that sort of stuff. There are only so many hours in a day, and every hour that Hector [Sants, chief executive officer of the FSA] or I or other senior people spend thinking about that, we are not thinking by definition about the very, very large problems which are in the global financial system.