Sants says: “The proposed wording for the PRA’s statutory objective contemplates that firms will fail and charges the PRA with making sure that when failure occurs, it happens in a way that minimises disruption to the financial system.
“To achieve this goal, it will focus supervisory resource, particularly senior management resource, on delivering intensive, intrusive, judgement-based supervision focusing on the issues that matter to the safety and soundness of the firm. The FSA was in the past susceptible to accusations of ‘tick box’ regulation and it is vitally important that the PRA puts itself beyond the risk of such criticism.
“The PRA will not be attempting to pursue a “zero failure regime”. Persuading society that this is an acceptable goal will be a challenge.”
In addition, Sants stressed the importance of the PRA’s engagement with European bodies, recognising that most prudential policy implemented in the UK is now formulated at the European Union level.