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