The FSA's Clare Bolingford has had a busy few years. Joining the FSA in 1999, she was offered the post of Executive Assistant to CEO Hector Sants in 2007. One week after Clare started in her new role, Northern Rock's liquidity problems came to a head with the UK's biggest bank run in living memory. Clare was at the centre of the action, moving up to be Sants' Chief of Staff and working closely with him on containing the effects of the crisis throughout 2007 and 2008. Clare has now been promoted to Head of the Executive Office, and is currently managing the FSA's transition programme in line with the government's proposed restructuring of the organisation.
We asked Clare to explain exactly what the regulator does: "The FSA supervises the financial sector in the UK, making sure that it's stable and working efficiently - which has obviously been a challenge over the last few years! The FSA also works to ensure the public get treated fairly in their dealings with financial services firms."
Much of the FSA's work has a European dimension: "The European relationship is very important for us as a lot of financial regulation now comes from the EU - we need to ensure we get the best deal in Europe for the UK economy, its firms and its consumers." The FSA is currently working on a number of significant projects at a European level, most notably the implementation of Solvency II, a European directive that aims to standardise - and reshape - how the insurance industry operates across the 27 EU member states.
The FSA's regulatory work is divided into several main areas:
- Policy: Determines UK regulatory principles, and implements European rules.
- Supervision: Monitors firms to ensure that they are complying with regulation.
- Authorisation: Ensures that new firms are ready to comply with regulation.
- Risk: Monitors specific market risks.
- Enforcement: Investigates and penalises individuals and firms who break the rules.
Under the proposed restructure, which Clare is in charge of implementing, these functions have been split into two distinct teams.
The Prudential Business Unit (PBU) is focused on whether banks, insurers and some investment firms regulated by the FSA are financially sound: "We ask whether a firm has enough capital and enough liquidity - what assets and liabilities it holds and how it holds them - and whether its business model is sustainable."
The Conduct Business Unit (CBU) looks at how firms go about their business: "We consider how a firm interacts with other market participants, including consumers, and whether it's obeying market rules - for example, managing conflicts of interest and trading responsibly."
The government plans to eventually divide the FSA and its current functions between three separate bodies. The firm-specific focus of the Prudential Regulation Authority (PRA) (currently the PBU) and the Financial Conduct Authority (FCA) (currently the CBU) will be complemented by the Financial Policy Committee (FPC), an umbrella organisation that will look at systemic risks in the UK's financial services industry at a high level.
Clare explains the rationale behind these changes, which are intended to be implemented fully by 2013: "The financial crisis revealed that no-one was sufficiently focused on risks to financial stability from within the system itself. Creating the FPC will fix this problem to a certain extent, but the government wanted to go further. They felt that splitting the FSA's objectives between two new organisations would create a greater focus on these single objectives and reduce tensions over the allocation of resources."
The financial crisis has had a number of other effects on the FSA: "We've changed the way in which we operate substantially, and for the better. For example, we're more intrusive regulators than we were before. We're harder on firms: we're telling them that they have to do more than we've expected from them in the past."
Clare feels that the challenges of the past few years - and on an ongoing basis - have led to excellent opportunities for the FSA's employees: "Our people have developed at a much greater rate than they would have done otherwise." Junior staff in particular have benefitted: "Graduates coming on board have to learn to give firms difficult messages, so we've put a lot of effort into coaching them to deliver these. If you're telling a CEO to do something different, you need to know how to stand your ground."
The FSA recruits each year for several graduate schemes. The largest of these is the general Graduate Development Programme, which is currently being expanded because of the forthcoming changes to the FSA's structure. Successful candidates spend three years completing a series of rotations across the organisation and an external secondment. Participants on the scheme are given extensive training, which could lead to professional finance or accountancy qualifications. Hannah Harrison, Graduate Recruitment Manager, tells us: "We invest heavily in the development of graduates, and give them ownership of the shape of their career." The FSA offers its recruits a unique breadth of opportunities: "It's a good place for people who are interested in finance, but don't know in which area they want to specialise. You can get exposure to everything from banking to risk management to policy development to enforcement - a really broad foundation for your career." Thanks to the FSA's strong relationships with the financial services industry and European regulatory institutions, staff can easily gain experience elsewhere in the sector as well.
What kind of graduates is Hannah looking for? "People interested in finance and in contributing to the soundness of the financial system. You need to be intellectually curious and able to understand both the details of what the industry is doing and the big picture. We like candidates who get into the regulatory mindset - they can express their knowledge of the financial sector, but are able to think about the regulator's point of view as well. We're also here to protect consumers, so being able to communicate our work in a clear manner is also important."
Graduates who decide to join can expect to have, like Clare, a fascinating career. As Hannah tells us: "You can't do this job anywhere else - being in regulation is a unique experience. And if you join the FSA now, you'll be coming in at an incredibly interesting time. You'll be at the starting point of a new structure for regulation in the UK as the FSA undergoes a profound evolution - and you'll play a part in shaping the new organisations."