Are we right to blame the F.S.A. ?

As the so-called 'credit crunch' disaster, spreads and worsens throughout the globe - Asian markets are now in a downward spiral as I write - so the problem with the casual laissez-faire lending policies of the British banks is being blamed on the Financial Services Authority, which is supposed to oversee all financial dealings in the UK.

I wonder, though, if this is entirely fair, for an organisation can only respond as well as it is allowed to. The FSA is a non governmental body reporting to the Treasury with the brief of policing the way financial institutions operate.



Clearly, in view of the ludicrous dealings which, it is now clear, have been undertaken by British banks this regulation has been proved ineffectual. But in the past, the FSA has incurred the impatience and annoyance of the present Labour Government, Tony Blair expressing the opinion to his officials that the FSA was stifling growth with over regulatory control. So angry were the executives of the FSA that they wrote to Blair demanding an explanation.

Well if you are set up to do a job, and then told discreetly 'Don't exercise TOO much zeal, will you!' what signals do you pick up about what is expected of you ? One of the criticisms of the FSA is that it is staffed with former civil servants who are used to obeying 'His Master's Voice' and therefore dutifully listen to hints and signals from government.

It has been suggested, maybe unkindly, that the FSA is an elephant's graveyard for civil servants who had reached the end of their useful lives in government - second grade staff in other words - who are not going to rock any boats.

It seems to me that, in the light of this world crisis, the FSA has an outstanding opportunity to break free of whatever constraints it was operating under. It has a new Chairman and a new Chief Executive as of last month - a perfect opportunity for new brooms to sweep very clean indeed. Maybe there needs to be a turnover of staff and some people brought in from commerce and industry, but its clear that the FSA - and its relationship to government - needs a good shake up and a much less cosy relationship with the wishes of Ministers.