In contrast the asset management regulators had no real concept of consolidated or group supervision and looked primarily at each legal entity in a group by itself. A small building society would be visited by staff from the Building Societies Commissioner every six months, while the insurance regulators’ norm for a company with far greater assets than 42  that small building society would be one visit every three years . Through a series of public papers, the FSA therefore embarked on defining a common approach towards all of the institutions it supervised. It defined its interactions with firms into 5 broad activities: authorisation; baseline monitoring; thematic work; specific risk mitigation; and work once a risk has escalated or crystallised. 40  Building Societies Commission (BSC);Friendly Societies Commission (FSC); Insurance Directorate (ID) of HM Treasury; Investment Management Regulatory Organisation (IMRO); Personal Investment Authority (PIA); Registry of Friendly Societies (RFS); Securities and Futures Authority (SFA); Securities and Investments Board (SIB); Supervision and Surveillance Division (S&S) of the Bank of England 41 FSA website: http://www.fsa.gov.uk/about/what/approach 42 Foot, Michael. ‘The FSA: The first six years’, Journal of Financial Regulation and Compliance, Vol. 12 Issue. 3, (2004), pp. 201-205 14  All speeches are available online at www.bankofengland.co.uk/speeches  14  The extent of the FSA’s interaction with firms was defined by its assessment of two factors: a firm’s probability of failure and its likely impact upon failure.
Does it have a sustainable business? Are the people running it competent, open and honest? With that in mind, the types of activity undertaken by supervisors became well-established, particularly as supervisory approaches evolved, and indeed began to conform, in the latter half of the twentieth century. This evolution has laid the groundwork for the supervision that we undertake at the PRA today, with some obvious exceptions such as cyber risk which calls for innovation in our approach. It would be hubristic to condemn and discard all the regimes of the past, or to insist that our approach is, for the first time in supervisory history, perfect. But I am confident that we have distilled the best (often basic) elements of supervisory practice from our mixed heritage – forward-looking, judgment-based, focused on the key risks – and combined these with a healthy dose of common sense to deliver the PRA’s approach. So what conclusions should we draw from the evolution of supervision over the past 100 years? Will a supervisor in 2117 look back and say the PRA had the best way of doing things? I doubt it – supervisors of the future will surely identify ways to improve on various elements of our current supervisory model. Our approach here at the PRA is a good one but we would be wise to have some humility about it.