The Guernsey Financial Services Commission has formed a team to be supported by Ernst and Young to undertake an overhaul of
the functioning of the Commission in its regulation of financial services entities
to provide cost efficiencies against the background of the increasing regulatory workload.
The announcement is a response to an Ernst and Young report commissioned by the government, which recently identified that while the agency is
generally seen to provide efficient and cost-effective oversight of the financial
services sector, to keep pace with changing standard in light of the global
financial crisis and increased scrutiny of offshore financial centres, the Commission
has been required to invest more heavily in recent years to maintain a robust regulatory regime.
Operational costs have trended upwards as a consequence, and Guernsey is now
considering how to rationalize resource allocation to maintain a world-leading
regulatory regime, that places a low burden on businesses, and is developed
at minimal cost to the industry and government.
An implementation plan to identify the actions necessary, the sequence in
which they should be undertaken, the resources needed to achieve them and the
delivery timeline is being prepared by the end of January.
The appointment of a Chief Operating Officer, as recommended in Ernst &
Young’s report, will be advertised soon and it is expected to take some months
before the recruitment process is concluded, the government said.
In summary, the Ernst and Young report identified a number of significant changes to financial
services regulation in the pipeline that will impact the Commission's funding needs,
particularly legislative developments at the European Union-level. “Regulatory on-costs
from these changes need careful consideration as part of the island's financial
services strategy, particularly taking into account the views of the industry.
Other potential changes to retail regulation, the effects of possible consumer
protection legislation and pensions regulation would all require additional
regulatory effort. If this effort is to be undertaken by the Commission the
resulting costs are likely to be significant and would require subvention from
the government."
Ernst and Young warned that the Commission will require flexibility to respond
to the new business models that financial services firms are likely to adopt
in response to the crisis and new regulation including consideration of the
implications for Guernsey of more nationally-focused supervision elsewhere.
The reported recommended: "The Commission must maintain its strong reputation globally as expectations
of proactive risk-based supervision and effective enforcement grow, by increasing
specialisation and maximising the benefit to be gained from supervisory experience
and expertise in its operations," but this would come at a cost.
“The report demonstrates a need for change. Historically, the commission has
evolved to effectively meet changing regulatory demands. The pace of change
and regulatory development is likely to accelerate over the next few years and
the Commission will need to evolve with that.”
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