Davies drafts old guard into new City regulator
Tom Stevenson, Financial Editor, reports on the creation of the new City watchdog.
The new unified City regulator began to take shape yesterday after Howard Davies named three managing directors to work under him, drawing exclusively on existing regulators to fill the posts.
He also clarified the structure of the enlarged financial services watchdog, confirming that the system of regulation by type of institution was to be ditched in favour of supervising different functions across all types of business.
Dubbed SuperSIB by the media and known as NewRO internally, the new watchdog will not be named officially until the end of the month when the new organisation will be formally launched and its new executives introduced.
By opting for a flat management structure, with no chief executive, Mr Davies found senior positions in the new organisations for the key figures in the self-regulatory organisations that will be replaced by SuperSIB.
He deliberately avoided the creation of a chief executive's position in order to maintain the loyalty of senior regulators who might otherwise have been unwilling to give up their existing fiefdoms for what they perceived to be smaller jobs.
The only surprise omission from yesterday's line-up was Securities and Investments Board chief executive Andrew Winckler, who leaves SIB at the end of the year. Like Colette Bowe, head of the Personal Investment Authority, Mr Winckler decided against swapping the top job at an existing regulator for a second-tier role in the enlarged watchdog.
The three managing directors named yesterday are:
Richard Farrant, head of the Securities and Futures Authority, who will chair SuperSIB's management committee and be directly responsible, as chief operating officer, for the regulator's internal operations, including human resources and finance.
Michael Foot, the Bank of England executive director responsible for banking supervision, who will head up a new financial supervision function encompassing all types of institutions.
Phillip Thorpe, who has headed the Investment Management Regulatory Organisation (Imro). He will lead an authorisation and enforcement division and take on responsibility for consumer relations.
Gordon Brown, Chancellor of the Exchequer, and Eddie George, the Governor of the Bank of England, said yesterday they planned to make the appointments to the SIB board before Royal assent was given to the Bank of England Bill, which stripped from the Bank its supervisory role.
Once that bill is passed, expected to be in the spring of next year, the SIB board will become responsible for all regulation. The existing self-regulatory organisations will, however, not be officially rolled into SuperSIB until a new financial services act is passed, which might not be until 2000.
Mr Davies said yesterday that two-year transition period presented risks, but he said it was a better alternative to leaving the SROs independent. Wrapping the front-line regulators in informally would reduce the risk of staff leaving or firms dragging their feet on enforcement issues because they felt they were dealing with a lame duck regulator.
The appointments were being seen yesterday as a neat solution to a potentially difficult combination of high-profile appointments. Observers said Mr Farrant was being rewarded for running arguably the best-managed SRO, while Mr Thorpe's appointment was viewed as an appropriate prize for his deft handling of the Peter Young scandal at Morgan Grenfell in which he ensured that thousands of investors were promptly compensated.
It is thought that success, together with a series of stiff fines for regulatory transgressions, gave the 43-year-old former barrister from New Zealand the edge over Ms Bowe, whose PIA has struggled to enforce adequate redress for the pensions mis-selling scandal.
As well as running the SFA, Mr Farrant, 52, has experience of banking supervision at the Bank of England and as an adviser to the Hong Kong Banking Commissioner where he handled a succession of crises at local banks.
Mr Foot, 50, has been at the Bank of England since 1969 when he joined as an economist. His career has included a spell as head of the Bank's foreign exchange division and as the UK's representative at the IMF in Washington.
Other appointments announced yesterday included Oliver Page, a deputy director at the Bank of England, as a director of financial supervision. Martin Roberts moves from the DTI to become director of insurance and friendly society supervision.
Mr Davies said yesterday: "I now have my top team in place. All three bring particular strengths. But the key will be for us to work together as a team. We are fully committed to doing so."
The creation of the new vertical structure replaces the old system in which one office oversaw all aspects of regulation for a particular type of financial business. Mr Davies said the new system had been arrived at after an internal study backed up by outside consultants from McKinsey.
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