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fsa post northern rock recommendations March 26, 2008

Posted by Bradley in : Uncategorized , trackback

The FSA published some sections of its report on Northern Rock today, including its 7 high level recommendations for the future supervision of “high impact” firms:

– FSA senior management to have increased engagement with high impact firms;
– FSA to increase the rigour of its day to day supervision;
– FSA to increase its focus on prudential supervision, including liquidity and stress testing;
– FSA to improve its use of information and intelligence in its supervision;
– FSA to improve the quality and resourcing of its financial and sectoral analysis;
– FSA to strengthen supervisory resources; and
– FSA senior management to increase the level of oversight of firms’ supervision.

The FSA management response describes some of the ways in which the FSA is addressing the issues. The “profile of prudential risk management and business analysis in the FSA will be enhanced” by turning the risk review department into a division. However:

Our supervisory framework is not designed to ensure that any given institution cannot fail. Rather, it remains a balance between seeking to mitigate risk, particularly to consumers and market stability, while fostering innovation and competition (which by definition involve risk).

All of which just seems to raise more questions.

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