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The Regulators’ Revolt

Britain's Conservative government recently sought a "call-in" power that would authorize it “to direct a regulator to make, amend or revoke rules.” But facing full frontal opposition to the plan from the regulators themselves, the government found itself in a hole – and wisely stopped digging.

LONDON – When I chaired the UK’s Financial Services Authority (FSA), in those prelapsarian days before the 2008 global financial crisis, I was regularly asked by financiers who resented our intrusions into their profitable lives, “Quis Custodiet Ipsos Custodes?” Who guards the guards?

In the original Latin source, Juvenal was referring to corrupt sentries taking advantage of women whose morals they were supposed to protect (not a problem with which I am familiar). But the question is a handy catchphrase and debating point for those who find themselves at odds with their regulators. It is the financial equivalent of the oft-heard playground cry, “Not fair!”

At the time, I did not take the charge very seriously. Far from the FSA being “judge and jury in its own court,” as the accusation went, its authority was hedged with constraints. The statute within which we worked was tightly drawn, and the Board was predominantly made up of independent outsiders, some from the industry. Practitioner and Consumer panels had rights of access, regulatory decisions could be appealed to the courts, with the potential for judicial review, and both Houses of Parliament regularly held me to account.

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