Regulator urges more progress on Basel II compliance

On the work by firms for the Pillar 1 operational risk requirements of Basel II, Sants said the FSA were encouraged by what they had seen so far, but stated that considerable progress was still required, particularly for those having AMA ambitions. "Firms need to think through the relationship between data collection, interpretation, and risk mitigation, in other words how Op Risk feeds through to decision-making".

For Pillar 2 requirements, the FSA are continuing to work closely with industry experts and the Committee of European Banking Supervisors, aiming to ensure the implementation of requirements for Basel II is reasonable and practical. These include acceptance of alternative approaches to capital models for Pillar 2, as well as making the pillar "proportionate and not over-engineered" for smaller firms.

In closing, Sants remarked, "For all firms – whether you plan an advanced or standardised Pillar 1 approach – there is a need to turn attention to what you need to do to meet your Pillar 2 obligations".

The full text of Hector Sants speech, including a commentary by him on the implementation of MiFID, is available on the FSA website.