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The great box-ticker takes charge

Richard Northedge

Wednesday, 4th June 2008

Richard Northedge on the FSA's new chairman

More box-ticking might seem a sensible answer for a regulator that failed to spot impending disaster at Northern Rock — but in fact, that bank ticked all the boxes; what the FSA failed to apply was scepticism and common sense. Turner needs to restore morale as he tightens the FSA’s monitoring, but his methodological changes risk being diverted by distractions from left field. His experience on pensions and in banking will help (besides his Chase stint, he became vice chairman of Merrill Lynch Europe in 2000, cancelling previously announced plans to join Schroders, and is a non-exec at Standard Chartered), but the FSA brief is far wider than that. The sudden emergence of split-capital trusts, Equitable Lifes, mis-selling scandals, liquidity crises or insider-dealing scams risk upsetting the clearest reforms. Like the credit crunch, falling markets — whether in shares or housing — will reveal problems the FSA has never seen.

Then there are the politics to handle. The FSA was given the banking supervision role after the Bank of England let BCCI slip though its hands; in the aftermath of Northern Rock, part of that role will revert to the Bank. Davies had been a deputy governor of the Bank as well as a Treasury official and adviser to the chancellor; Turner must learn the hard way the uneasy realpolitik of the tripartite structure. This faux Scotsman — born in Ipswich but schooled north of the border and always known by his Scots middle name — may have Alistair Darling’s backing but he has yet to impress the Treasury select committee chaired by the acerbic John McFall.

But Turner knows Whitehall’s corridors, and his considerable brain is matched by charm. No doubt he will quickly shed his Labour-friendly image to work with a new Tory government and, at 52, he is young enough to be the first FSA chairman to serve two five-year terms — if his ambition does not drag him elsewhere, and if he is not toppled by an unforeseen financial catastrophe that does not fit any of his boxes.

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