FSA chairman Callum McCarthy has warned of potential conflicts of interest if regulators are denied ...
FSA chairman Callum McCarthy has warned of potential conflicts of interest if regulators are denied supervision over firms that are headquartered abroad.
There has been lobbying by figures such as European Central Bank executive member Tomasso Padoa-Schioppa for supervisory convergence.
There have also been complaints from firms about the burden of having to deal with different rules in the various countries in which they operate.
But McCarthy believes the legitimacy of regulators could be undermined if financial institutions were supervised exclusively by their home country.
He said: "How, for example, would Parliament respond to an answer about a major entity in the UK, perhaps one which had run into difficulties that had caused severe knock-on effects, when the FSA had no information about the entity and had made no decisions about it?
"Would it be good enough to say all enquiries should be addressed to the regulator in some other country, perhaps in the EU, perhaps elsewhere?"
There are further practical problems, as regulatory bodies have different powers, international rules, such as EU directives, are applied in different ways, and there are difference in the resources and skills available to them. Compensation schemes also vary. With US and Australian bank regulators having a legal duty to give preference to US and Australian depositors.
"The powers of the FSA and of the SEC, which were exercised in the context of the recent Shell decisions, are powers not available to the Dutch regulator," McCarthy told a conference at the London School of Economics.
"It would be unattractive if the sanctions which were available to be used were restricted to those in the home regulator's country."
Instead, he wants a distinction between those institutions that have international presence of little importance and could be regulated in the most part by the home regulator and those whose activities are of major importance to the host country and require ongoing regulation from that state.
McCarthy added: "For HSBC, we at the FSA have recently begun to chair meetings of what we call the college of HSBC regulators, dealing with HSBC's activities in the most important markets in which they operate. By bringing together regulators from the US, Canada, Switzerland, Hong Kong, France and the UK we are able to cover some 80% of HSBC's assets.
"We need to develop this sort of approach to provide further guidance and help to those countries where the firm's activities are very significant to the country, even if not particularly important to the whole of the HSBC group."