Published: 12th March 2010

Following on from the release of CP10/3 (“Effective corporate governance”) – see Regulatory Roundup of 8th February – Graeme Ashley-Fenn spoke the other day at a BSA seminar on this very topic. He is the FSA’s Director of Permissions, Decisions and Reporting so his role encompasses responsibility for the approved persons regime; he informed the audience that he is ‘particularly interested in’ corporate governance.

Although corporate governance has always featured on the FSA radar, and is a feature of ARROW visits, it seems that the FSA is strengthening its interest in this area (‘our regulatory approach before the crisis underestimated the importance of governance’). The factors he quoted as contributing to the financial crisis were capital and liquidity with poor governance an important factor (oh, and a reference to ‘some failures in the regulatory system’).

In the FSA’s view effective governance means a board and executive that can interact effectively to deliver an agreed strategy, whilst managing the risks faced. Not for the first time mention was made of both the value of NEDs, effective challenge and succession planning.

As is always, proportionality is key here; what works for a 3 man firm will not necessarily work for a 30 man firm and vice versa. The message coming through is that corporate governance still remains relevant for firms and that it is seen as a risk mitigant; it wouldn’t be surprising if an FSA thematic was developed.

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