Hector Sants says the FSA will not be seen as a light touch
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Hector Sants, the head of the City regulator, has issued a stiff warning to financial firms including the threat of jail for those flouting the rules. Firms had still failed to accept a "collective responsibility" for the financial crisis, said the Financial Services Authority's chief executive. The FSA would now step in to police financial products before they were offered to customers, he said. A string of recent fines were only handed out after consumers lost money. The FSA has stepped up action against fraudulent mortgage brokers, firms mis-selling payment protection insurance, and companies mistreating customers in arrears on their home loans. As a result, it levied a record number of fines in 2008-9, which could be outstripped in 2009-10, and banned a number of individuals from the financial services industry. 'Light touch' However, in a speech in London on Monday, Mr Sants explained why the FSA should no longer be seen as a "light touch" regulator.
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I personally remain unconvinced that all senior management have taken on board the need to change and operate in a genuinely different manner
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"I have made clear that when firms do not adjust their behaviours they can expect tough action from the FSA, either to require them to do so, or when that is not possible, to require them to mitigate risks their actions have created," he said. "And yes, that does mean people go to jail." He said the FSA wanted to protect consumers and secure firms that were financially stronger and more resilient. "It is important to recognise that the FSA will not presume that the firms we supervise have learned the lessons of the past," he said. "There remains, I believe, an absence of the acceptance of collective responsibility for what has happened. I personally remain unconvinced that all senior management have taken on board the need to change and operate in a genuinely different manner." The spotlight would be thrown on bosses, with the FSA leading a discussion on how to asses a senior executive's impact on an institution's culture. He said regulation should ensure these people were technically equipped and of the required integrity. Prevention Mr Sants revealed that the regulator had told some banks or building societies to rein-in their activities in a bid to protect consumers.
The mis-selling of payment protection insurance has led to many fines
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In other cases, it had prevented some from entering the financial services market at all. But he said there was a limit to how much a regulator could ensure everything was done properly. "It would be a mistake not to recognise that some of the failures which have occurred have their roots in issues of culture and behaviour," he said. The Conservatives have pledged to scrap the FSA if the party wins power and hand back supervisory powers to the Bank of England. Penalties In 2008-9, the FSA imposed financial penalties of £27.3m. So far in this financial year, it has imposed fines of £19.8m, which is greater than at the same point a year ago. Some 56 people were banned from the industry in 2008-9, with an additional 29 being prohibited since. In one of the latest cases, the GMAC-RFC mortgage lender was fined £2.8m for mistreating customers who fell into arrears. It was also told to repay £7.7m, plus interest, to 46,000 of its borrowers. The FSA said the company levied unfair charges on borrowers who fell behind with their repayments and was too eager to repossess their homes.
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