The question cant be easily answered. Margaret Cole, the FSAs likable and fiercely effective former head of the financial crime division, resigned in February after Wheatley was named to the top job at the FCA. During her seven years at the FSA, Cole was responsible for helping the regulator win its first criminal convictions for insider trading no mean feat. On March 20, PricewaterhouseCoopers announced that Cole will join its London-based division, PwC UK, as its general counsel and will become a member of its executive board in the fall. The financial services industry may well wonder how conduct regulation is going to be handled in the months ahead if the most experienced supervisors who understand the intricacies of their businesses have either left the FSA or been redeployed. Sants has not elaborated on his plans, but it seems very likely that he will end up with a high-level job in the private sector, having spent nearly 30 years of his career at UBS and Credit Suisse before joining the FSA. As a regulator, he never seemed to enjoy the limelight, although few would question his dedication as a public servant. But Sants distaste for public spectacle makes his decision to leave now, before cross-party politics begin to color the appointment process, easier to understand.
Hector Sants has had enough. Last month the chief executive of the U.K.s Financial Services Authority shocked the government and the banking industry by announcing his resignation. His decision was as abrupt as it was unexpected. Although Sants, 56, had tried to quit his post once before, in February 2010, Chancellor of the Exchequer George Osborne persuaded him to stay and help Prime Minister David Camerons new coalition government overhaul the British regulatory system in the wake of the financial crisis. That process has yet to reach completion. Sants sudden exit casts a shadow of uncertainty over that effort, which will effectively break the FSA into two separate-but-equal regulatory agencies come 2013. The Prudential Regulation Authority, organized under the aegis of the Bank of England, will supervise systemically important institutions, including banks and insurance companies; the Financial Conduct Authority, a stand-alone regulatory agency, will be charged with maintaining the integrity of the U.K.s capital markets, overseeing financial services firms and protecting consumers. If Sants had stayed, he would have been made the first chief executive of the PRA and named as one of three deputy governors of the central bank. Unexpected as Sants decision was, his former colleagues knew what the financial crisis had already cost him. Sants worked extraordinarily hard through a harrowing period, says Gregory Brandman, a former manager in the FSAs enforcement and financial crime division who decamped in October of last year to join law firm Eversheds as a partner. It wasnt an enormous surprise that he decided he didnt need the aggravation any longer. Sants departure may have been hastened by the political heat hed begun to take from Parliaments Treasury Committee, which summoned him in January to discuss the FSAs report on the failure of Royal Bank of Scotland Group. He was also expecting to be summoned back by the committee for a potentially bruising preappointment hearing this spring, in anticipation of his elevation to CEO. Andrew Bailey, Sants deputy at the FSAs prudential business unit, will temporarily assume his former bosss role once Sants leaves at the end of June; Martin Wheatley, former CEO of Hong Kongs Securities and Futures Commission and onetime deputy CEO of the London Stock Exchange Group, will remain head of the conduct business unit and ultimately take on the role of chief executive of the FCA. Although the FSAs formal split has yet to be implemented, the pending division is already having a powerful distracting effect on the regulators staff members, who have worked feverishly to ramp up their oversight of Londons leading institutions and are now faced with either being absorbed into the Bank of Englands new subsidiary, the PRA, or getting left behind. There is real concern within the FSA that all of the best supervisors are effectively being pinched by the Bank of England for the PRA, where theyre going to get plummy, high-profile jobs supervising systemically important institutions, says Brandman. Theres clearly a heavy bleed of talent to the bank. What is going to happen to the quality of conduct supervision if all of the best supervisors are on the prudential side?