The Adam Smith Institute has slammed the FSA’s response to the financial crisis, saying its failure to recognise the extent of its own failings compromises its ability to improve regulation.
Authors of the report Tim Ambler and Keith Boyfield say the central problem is the FSA’s “self-obsession and self-justification”. Their report, Regulatory Myopia, says the FSA should be streamlined, rather than expanded, and core responsibilities should be given to other bodies. Adam Smith Institute director Eamonn Butler says: “Instead of being expanded, the FSA should be scaled back to what it can actually achieve, and more weight given to existing market-restraint structures, such as the Financial Reporting Council, the Accounting Standards Board and non-executive directors.”
The report claims that the FSA has introduced “red herrings” such as international responsibilities, hedge funds and offshore funds to distract readers from its own responsibility in the crisis.
Should the FSA be scaled back and supervision of the banking system be given to the Bank of England? How can the performance of the FSA be judged moving forward to minimize further regulatory failings? And who should the FSA ultimately answer to on a formal basis?
Published in MoneyMarketing here.