The FCA has published a speech given by its chairman, John Griffith-Jones. The speech is entitled, What makes good conduct regulation?
In his speech Mr Griffith-Jones discusses the following building blocks for conduct regulation:
- government policy;
- a clear set of objectives for the regulator, and a clear perimeter of coverage;
- a well-developed and shared understanding of risk tolerance;
- operational excellence; and
- a basis of measurement of inputs, outputs and outcomes, including intended and unintended consequences, with transparency of results.
In terms of government policy Mr Griffith-Jones states:
“Policy is for elected government not for the regulator. This is not to say that the regulator should be passive in any sense; the FCA is perfectly capable and willing, to draw government’s attention to the consequences of policy change. But experience tells us that regulation acts most effectively as a support for government policy not a substitute. It also makes clear that regulation cannot be independent of government, although regulators most certainly should be in discharging their duties.”
In terms of operational excellence Mr Griffith-Jones mentions:
“We need to understand psychology as much as being financial analysts. Behavioural economists have shed light on the way that real people behave, and it is not necessarily in line with econometric models.”
View What makes good conduct regulation?, 13 February 2017