Speaking at the PRA Banking Conference in London, Sants said that it was essential for the PRA to have a “clear, coherent and transparent methodology” for supervision.
He said this was needed not only in order to be effective, but ensure that its objectives and approach are supported and understood by those it serves – UK society.
Sants added: “It seems to me that a major issue for the FSA was that it never achieved the full support of Parliament and the public, not least of which there was a misalignment on the understanding of the purpose and value of supervision.
“The PRA must start its life with the full backing and agreement of those whom it serves.”
Sants continued that the PRA must avoid “regulatory capture” by being accountable to Parliament, the public and the Court of the Bank of England, not the firms it regulates.
He said: “The importance of the PRA avoiding any suggestion of regulatory capture, and having the necessary respect and authority, will be of particular importance when the consequences of its interventions will potentially be at variance with the public’s short-term aspirations. For example, to use the common metaphor, ‘removing the punchbowl from the party’ is not a popular act.”
