FSA Chief Executive Speaks On Regulatory Cooperation Between US And EU

by Robin Pilgrim, LawAndTax-News.com, London

20 February 2004

Speaking this week on the practical implications of SEC regulation outside the United States, chief executive of the UK's Financial Services Authority (FSA), John Tiner praised the increasing cooperation between European and US regulators over the increasingly inter-dependent European and American capital markets, but stressed that progress still needs to be made.

"The growing similarities of the US and EU, especially the UK, capital markets makes it increasingly of practical importance that regulatory authorities on both sides of the Atlantic work work to reduce unnecessary differences in standards that might create barriers to entry and hinder the growing inter-dependence of the two markets," he announced, going on to observe that:

"Key to this, among other things, are the capital adequacy standards that apply to the large investment banking groups containing broker-dealers, especially at a group-wide or consolidated level and the accounting, auditing and disclosure standards that apply to those who are seeking to raise capital."

Observing that consolidated supervision has been a fact of life in the banking sectors of both the US and the EU for many years, Mr Tiner explained that:

"Outside of the banking sector the application of consolidated supervision is more recent and more controversial. We believe, however, it is fundamental to the modern and appropriate supervision of large financial groups that undertake financial activities as principals such as taking deposits, significant own account trading or underwriting insurance risks. Put at its simplest, the risks facing financial groups are not the same as the sum of the risks facing its constituent parts. And it is the job of the group's management and supervisors alike to identify and address risk at the group-wide level."

The FSA chief also spoke extensively with regard to common accounting and auditing issues, and the need for improved corporate governance, announcing that:

"Both the SEC and the FSA have recently played leading roles in the reform of the process whereby international auditing standards are set, as they had done a few years earlier in respect of the process for setting international accounting standards. We expect that the result will be a more transparent and accountable process for setting international standards on auditing and auditor independence."

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