FSA head Hector Sants to resign

FSA office The FSA is being replaced next year

The chief executive of the Financial Services Authority (FSA), Hector Sants, has announced he is to resign in June.

It means he will not take up his planned role as boss of the new the Prudential Regulation Authority (PRA).

The FSA will be replaced in 2013 by two bodies. The PRA, part of the Bank of England, will regulate financial firms and the Financial Conduct Authority (FCA) will oversee consumer protection.

FSA chairman Lord Turner is to take on some of Mr Sants' responsibilities.

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There won't be much disruption for the Bank of England, because Andrew Bailey had already been lined up to succeed him”

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The Bank of England's Andrew Bailey will take over Mr Sants' position at the Prudential Business Unit (PBU) which presages the soon to be created PRA, and the FSA's Martin Wheatley will remain head of the Conduct Business Unit (CBU) which presages the creation of the FCA.

The creation of the new bodies has taken longer than most had anticipated, but the FSA denies reports this was the reason Mr Sants stepped down.

'No disenchantment'

The BBC's business editor Robert Peston said: "He is not going because of any disillusionment or disenchantment with the new system, but simply because at the age of 56 he wishes to do one more big executive job - and that would not have been possible if he had stayed on much longer."

Regulator scrabble

  • FSA: The Financial Services Authority, which currently oversees the financial services sector
  • BOE: The Bank of England, which looks after monetary policy in the current tripartite system introduced by Labour in 1997. The Treasury is the other body.
  • FPC: Financial Policy Committee, a new body that will have overall responsibility for financial regulation. It will oversee the two new financial watchdogs replacing the FSA.
  • PRA: Prudential Regulation Authority, which will take over responsibility for supervising the safety and soundness of individual financial firms and;
  • FCA: Financial Conduct Authority, which will be tasked with protecting consumers

Mr Sants has already established shadow structures within the FSA to mirror the new bodies - personally heading up the Prudential Business Unit as a precursor to the PRA.

"When I agreed to stay on as CEO in 2010 I committed to stay and deliver an orderly transition to the government's new regulatory structure," said Mr Sants.

"With the establishment of the twin peaks within the FSA I will have achieved that goal."

Vacancy

The chancellor said Mr Sants had found "a natural moment to seek new challenges".

However, his departure leaves the George Osborne needing to appoint a new boss for the PRA.

The FSA has already replaced Mr Sants as head of the PBU with his deputy, Andrew Bailey. The BBC understands that Mr Bailey was also set to eventually take over from Mr Sants at the PRA at the end of this year.

"The Bank will work closely with HM Treasury in searching for the first Chief Executive of the Prudential Regulation Authority who will also be the Deputy Governor with responsibility for Prudential Regulation," said a statement from the Bank of England.

FSA chairman, Adair Turner, paid tribute to his outgoing chief executive.

"He can rest assured that he leaves behind a transformed organisation, safe in very capable hands, with a robust blueprint for the future," he said.

The FSA has been criticised for failing to spot signs of excessive risk taking by banks prior to the financial crisis.

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