In particular, the FSA was criticised for: focusing on individual firms rather than the system as a whole; placing too much reliance on senior management and boards of firms to make decisions about the appropriate balance of risk and return; focusing more attention on conduct of business than on prudential strength; assessing ‘approved persons’ based on probity in the past rather than their competence for a specific role going forward; and 44  relying on unfettered wholesale markets to provide appropriate levels of customer protection . During this time, the FSA embarked on a Supervisory Enhancement Programme (SEP) to remedy perceived weaknesses, such as being “light touch” and “reactive”. But a change in government set the wheels in motion for a significant overhaul of the architecture of financial services regulation when George Osborne announced the abolition of the FSA in his maiden speech at Mansion House in June 2010,  45  and a new  supervisory approach was ushered in a few years later with the establishment of the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA). 43  FSA website: http://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=4&ved=0ahUKEwjSvKz71pnTAhUHIMAKHUvtAzYQFggrMAM&ur l=http%3A%2F%2Fwww.icmacentre.ac.uk%2Ffiles%2Ffinra_reading_list%2Fsupervision_oversight_sep08%2Fsupervison_and_oversig ht_fsas_approach_to_supervision_and_risk.pdf&usg=AFQjCNFpZ5SdEn1o5BNy8Dxh5tbTyP-eng&bvm=bv.152174688,d.ZGg 44 Turner review: http://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwiXmqjw15nTAhXKB8AKHUW5 CC8QFggcMAA&url=http%3A%2F%2Fwww.fsa.gov.uk%2Fpubs%2Fother%2Fturner_review.pdf&usg=AFQjCNFEP0NiS2fGmuePCRj3o0GLtZgGA 45 Osborne, George. Speech by the Chancellor of the Exchequer, Mansion House (16 June 2010): https://www.gov.uk/government/speeches/speech-by-the-chancellor-of-the-exchequer-rt-hon-george-osborne-mp-at-mansion-house  15  All speeches are available online at www.bankofengland.co.uk/speeches  15  Today’s supervisory challenge As I outlined at the start of this speech, the PRA’s model of supervision rests on a forward-looking, judgement-based approach to the supervision of banks, building societies and insurers.

Squeezed margins are mainly a function of increased lending competition in core building society markets, both from existing large banks that are rebuilding their market shares, and from new “challenger” banks that are seeking to carve out their own competitive niches. Squeezed margins at building societies are exacerbated when pitted against the mutual pricing strategy many have adopted to protect members in an era of low rates – and so, building societies seek to source new lending that earns higher than average rates. This combination of circumstances is what led a number of societies to broaden their lending appetites in the mid-2000s. I do not intend today to re-hash the full set of warnings about lending quality, assessing affordability and undertaking new business lines that John Tiner, as CEO of the FSA, set out to attendees of the 2004 BSA conference – if you want to remind yourself, his speech is still available to read on the archived FSA website! 46  However, I would observe that part of the reason why only 44 societies are  attending this conference rather than the 60+ that came to its equivalent in 2004 lies in the fact that many of those societies were unaware of, or failed to control, the risks they were taking. As survivors, societies here today ought to be well aware of the warning signs, but I’m conscious that corporate memories can be shed surprisingly fast.