David Hellier
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HECTOR Sants, boss of the embattled Financial Services Authority, yesterday launched a robust defence of the City&rsquo;s existing regulatory structure in defiance of Tory proposals, fuelling talk that he is preparing to step down within the next few months.<br /><br />City sources told City A.M. Sants will retire from the regulator either before or when his current three-year term ends in July, regardless of the future structure of the organisation. One added: &ldquo;He has done more than he was expecting to do. Whatever happens, it&rsquo;s hard to see him going beyond July.&rdquo;<br /><br />A former investment banker who lives in Oxfordshire, Sants is also keen to spend more time with his family.<br /><br />Speaking at the FSA&rsquo;s annual public meeting yesterday, Sants threw his support behind the current system of &ldquo;integrated supervision&rdquo;, where the regulator&rsquo;s duties towards assessment of bank risk and the protection of banking consumers are conducted under the same roof.<br /><br />His confrontational strategy&nbsp; was at odds with FSA chairman Lord Turner, who adopted a noticeably more conciliatory approach at the meeting, in a move that suggested a deliberate strategy not to alienate the Conservative Party. &ldquo;There are pros and cons to different models,&rdquo; Turner said. &ldquo;The key challenge is not to decide which model to have, but to make whatever is the chosen model work effectively.&rdquo;<br /><br />In stark contrast, Sants said: &ldquo;There are different types of high-level organisational structures around the world but regardless, the best supervision is always a system of integrated risk assessment, with a high level of interdependence between prudential and conduct risk.&rdquo;<br /><br />&ldquo;A large part of Sants&rsquo;s speech was aimed at justifying the continued presence of the FSA as the single regulator of financial services in the UK,&rdquo; said Paul Edmondson, a lawyer at CMS Cameron McKenna. &ldquo;He gave some good examples of scenarios where a split of prudential and conduct of business regulation between different regulators makes little sense.&rdquo;<br /><br />Sants&rsquo;s comments are at odds with Tory proposals to hand back the supervision of bank risk to the Bank of England, leaving a much-reduced and renamed rump FSA to deal with consumer issues.<br /><br />The Conservatives yesterday insisted they would not throw away all of Sants&rsquo;s work on the integrated supervision structure, saying the party aims to &ldquo;build on the approach the FSA has taken&rdquo;.<br /><br />The future of the FSA has become a political football with City minister Lord Myners telling City A.M. yesterday that he felt the Bank of England was &ldquo;too academic&rdquo; an institution and had the wrong culture to take on bank supervision.