The changing nature of financial regulation: the FSA explains

Joanna Gray, University of Newcastle

Introduction

The March issue of Financial Regulation International highlighted how the FSA had identified the continuing move towards what it terms ‘principles-based regulation’ (PBR) and the fact that a more detailed explanation of the practical explanation of this shift would be forthcoming from the FSA. This has now been published in the form of an FSA document entitled ‘Principles-Based Regulation: Focusing on the Outcomes that Matter’. This document should be read, discussed and its implications and message reflected upon, by all those active in the financial services industry whether they be frontline staff, senior management and board members or specialists in risk management, legal and compliance functions. FSA is becoming increasingly bold and intellectually confident in its articulation of PBR and this will be reflected at a practical and operational level. Therefore those in the industry need to understand what FSA means by PBR and learn to adapt to doing business within a regulatory framework characterised by principle, high level rules expressing desirable outcomes and expected behaviours more subtle than simple literalistic compliance.