"During the financial crisis, as I have said publicly, we [the FSA] gave our utmost and I do believe that in the circumstances there is nothing more the FSA could have done", said Sants in what is to be his last annual report before he steps down at the end of June.
What is more of a shock is that chairman of the FSA, Adair Turner, does not seem to agree with him, at least not regarding the three and a half years since he became chairman in autumn 2008.
"Those years have been dominated by the aftermath of the financial crisis, which began in 2007 and intensified dramatically in autumn 2008. That crisis revealed major flaws in the regulatory approach in place in the UK and across the world, and in the intellectual assumptions which underpinned that approach."
As we know the FSA is due to split formally into a "twin peak" structure some time in 2013, with the two replacement organisations – the Financial Conduct Authority and Prudential Regulation Authority – due to "fill the ‘underlap’ previously left between an inflation-targeting central bank and a regulator with a solely micro-prudential focus".
Crossed wires
It seems to me if a CEO and chairman of a unified regulator cannot get on the same page, the respective heads of a twin-peak structure may struggle to fill that underlap.
In the run up to the switch over the FSA is continuing to run its established single regulatory as well as the twin peak model, which it soft launched on 2 April.
Sants said: "The move to twin peaks is an opportunity to drive home and further embed the move to forward-looking, proactive, judgement-based supervision. It has crystallised the change from the old-style reactive approach to the new-style proactive approach."
And in the past couple of months the regulator has certainly sought to stamp its "proactive" mark on the industry.
It has published guidance against structured product mis-selling and traded life policy investments and committed to a review of unregulated collective investment schemes (Ucis).
A regulator can never win though, and there have been disgruntled responses to these guidances from people who feel they have a place in some clients’ portfolios.
Busy year ahead
Next year, with the implementation of the retail distribution review on 1 January, the regulator is bound to have another busy one on its hands, as advisers manoeuvre their way through the new financial services landscape and most likely seek further clarification and guidance.
The amount of penalties handed out lately also show the FSA means business, with not a week going by without a fund house or adviser being fined for some transgression or another.
"A new more effective supervisory approach to early intervention will always need to be supported by the credible deterrence of potential enforcement action. The intensification in the FSA’s enforcement achieved over the past five years owed much to the leadership of Margaret Cole, who headed the Enforcement Division from July 2005 and April 2011," Turner said.
Turner will be the direct report for Andrew Bailey and Martin Wheatley, the new heads of the Prudential Business Unit and the Conduct Business Unit respectively, which should at least provide some continuity.
Given he is more critical of the watchdog’s previous form than Sants has been, it could also leave it with a fighting chance of improving its performance.
