Prudential supervision role not understood, says Bailey
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Andrew Bailey, the deputy chief executive of the Prudential Regulation Authority, says a lack of definition means the proposed regulator has yet to understand its role.
Andrew Bailey
Bailey says “sufficient clarity of purpose” has not yet been achieved compared with its monetary policy role.
He says financial supervision should be anchored by a “clear public policy objective” that will allow parliament and the industry to hold the Prudential Regulation Authority (PRA) accountable and focus action.
The director says the PRA will be not pursue ‘no failure’ or competitiveness, aiming instead to promote financial stability.
He says: “Orderly failure, which is consistent with our objective of maintaining the stability of the financial system, is an acceptable outcome, and does not indicate that the supervisory system itself has failed.”
Bailey says the need for a clear policy objective is of key importance to ensure it is effective.
“The FSA has, during the crisis, moved to what is often described as an ‘intensive and intrusive’ approach to supervision,” he says.
“But it has to be focused, and to achieve that we must have a clear objective for what we are doing. With that, the charges of over- or under-regulating can be judged more sensibly against a better articulated standard.”
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