FSA reveals 'twin peaks’ regulatory milestone

IHector Sants has announced the introduction of a ‘twin peaks’ model operating within the Financial Services Authority (FSA), starting from 2 April.

Sants said the move marks a major milestone in the City regulator's reform programme. The introduction of the new model was unveiled during a speech by the FSA chief executive to the British Bankers' Association.

The new model will mean that banks, building societies, insurers and major investment firms will have two groups of supervisors, one focusing on prudential and one focusing on conduct.  All other firms not considered dual regulated will be solely supervised by the conduct supervisors, Sants (pictured) said.

Sants said that the FSA could not completely replicate the approach proposed by the government in the Financial Services Bill published at the end of January, but he emphasised that the changes would go as far as possible to ensure the move to the new regulatory structure in early 2013 will be relatively seamless.

The twin peaks model has four key characteristics:

• Two independent groups of supervisors for banks, building societies, insurers and major investment firms, covering prudential and conduct

• Supervisors making their own, separate, set of regulatory judgements against different objectives

• ‘Independent but coordinated regulation’ designed to allow internal coordination between both conduct and prudential supervisors to maximise the exchange of information relevant to their individual objectives, but with supervisors still acting separately when engaging with firms

• Retaining the principle of seeking to ensure that regulatory data is only collected once