Hector Sants, chief executive of the Financial Services Authority (FSA), says the regulator is prepared to force out firms’ senior management that do not respond to FSA warnings.
Addressing the Mansion House conference on values and trust earlier today, Sants argued that the regulator had a role to play in judging firms’ culture and ethics and should be prepared to intervene where necessary.
He said: “A poor culture at a firm often manifests itself in failures of governance or management—and in response to such failings, we have taken, and will continue to take tough action.
“For most firms that action shall be taken through the board. The ’tone from the top’ remains critical and if a regulator is concerned, its first action should be exhorting the chief executive and the board to take the necessary remedial actions.
“I would hope that in most cases boards would respond to such warnings. If not, regulators may well have to resort to the stick of the authorisation process and if necessary, push for those individuals to be changed, or where necessary, require them to be.” (article continues below)
Sants also used the speech to attack the bonus culture at banks, saying it was the FSA’s responsibility to ensure that pay does not encourage poor risk management.
He argued that the key to restoring faith in the banking sector was for banks to rein in the bonuses they pay to staff.
Sants said: “Remuneration practices, or bonuses, have been a symbol—a lightening rod of society’s lack of trust in bankers—and to address the trust issue, this state of affairs has to be recognised and resolved.
“I believe that unless bankers demonstrate sensitivity and exercise restraint in this area, trust will not be restored.”