Executives at the Financial Services Authority yesterday mounted a robust defence of the organisation but admitted that Tory plans to abolish the City watchdog were already making it hard to recruit staff at a crucial time.
The FSA chief executive, Hector Sants, said "it could be and it has [become an issue]" for the regulator, which has been sending e-mails around in an attempt to reassure staff.
He appeared to criticise the Conservative Party's plan, if it wins the next general election, to separate prudential regulation – which it would hand to the Bank of England – from conduct of business oversight, much of which would be taken over by a beefed-up consumer protection body.
"Underlying our approach is the belief that the most effective way to make judgments about the risks that firms and customers will face in the future is through the integrated assessment of risk which can be best achieved by integrated supervision," said Mr Sants.
"The concept of having supervisors who are seen to specialise in either prudential or conduct of business supervision is in my view outdated."
The chairman, Lord Turner, also said it was right that the FSA should pay £19.7m in bonuses to staff, a move which has been criticised in the wake of the near-collapse of Britain's banking system during the FSA's watch.
Lord Turner said: "The FSA has learned the lessons of the past and is taking measures to put it right. There is no magic organisation out there that could do better."
He said people should draw a distinction between the seven figure payouts for City traders – that can be many times basic salary – and FSA bonuses of the "10, 15 or 20 per cent level".
"These are a form of performance-related pay. They are paid based on people fulfilling or exceeding clear objectives set at the start of the year. If you don't do that [pay them] you will not be able to deliver the improvements we want to see," he added.
The two executives were speaking at the FSA's annual meeting, which was open to members of the public. More than 200 people attended.Reuse content