Financial Services and Markets Appendices to the Minutes of Evidence


Memorandum by the Institute of Chartered Accountants in England and Wales (ICAEW)

  1. We welcome the proposed improvements in the reporting requirements and governance structure of the FSA and in particular the number, appointment procedures and reporting responsibilities of the non-executive directors. However, if the Board of the FSA is to operate effectively then the non-executive directors must take a full part in the decision making process and be fully involved in the consensus building that will be necessary. They will thus be, quite rightly, committed to the decisions made. While this has many advantages in improving the quality of decision making and the breadth of experience employed, it also has the effect of reducing the independence of the non-executive committee. It is not realistic to expect non-executive directors to take a neutral stance in preparing a report on the effect of decisions that they have themselves been involved in making.

  2. We support the inclusion in statute of the principles for the implementation of regulation contained in Clause 2(3) of the draft Bill. They are important to the achievement of a number of policy objectives, including the continued development of a competitive and successful financial services industry. However, at present they do not appear to have any explicit enforcement or reporting mechanisms relating to them.

  3. Our preferred solution to the problems of reporting independently on the effects of the decision making processes of the FSA and of reporting on the fulfilment of the Clause 2(3) principles would have been for the appointment of an oversight board of knowledgeable individuals, without decision making responsibilities, to report on the operations of the FSA. In the absence of such a board, we welcome the Treasury's proposal that it will have the power to commission independent reports, at periodic intervals, into the efficiency and economy of the FSA's operations. We urge that this power should be extended to reports on the fulfilment of all the Clause 2(3) principles. We also recommend that fulfilment of the principles should be explicitly required to be covered in the FSA's annual report to the Treasury.

1 April 1999

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