What does it say about a regulatory organization when its fearless leader steps down weeks ahead of its potential dissolution?
It may not spell imminent disaster, but the prognosis sure ain't good.
Hector Sants, the head of Financial Services Authority in the U.K., has announced his resignation, effective this summer. To be sure, Sants was supposed to serve only three years, but the former City banker's decision comes at a precarious time for the future of the body: If the Conservatives are voted into power in the upcoming general election, the FSA will almost certainly be reabsorbed into the Bank of England. David Cameron, the Conservative party leader, has made it quite clear that he believes FSA deserves most of the blame for U.K. financial implosions.
It's true that Sants came into the organization with a laid-back attitude toward regulation. Since the financial crisis, however, he's been among the first of England's leaders to embrace new philosophies and mandates regarding financial reform.
For example, the FSA has added 280 supervisors and parceled out more fines to banks and firms that flouted the rules. Under Sants, the FSA introduced new proposals for pay structure and requirements for banks to hold more capital against potential losses.
If the FSA is dissolved, the Bank of England must be prepared to carry out some of the proposals left on the docket.