Hector Sants, chief executive of the Financial Services Authority, today admitted that a past presumption by the regulator that senior management at financial institutions should not be questioned proved wrong. The admission came as he outlined a “fundamentally different” approach for the FSA's successor under which regulators will act in cases where their own analysis of big issues differs with that of management.

Speaking in London to outline the future approach to banking in the UK, Sants said this morning: "The central regulatory failing in the period of FSA supervision was the inadequate standards for capital and liquidity...However, we also need to recognise that the FSA's supervisory approach rested on another presumption which has proved to be false; namely that senior management judgement and market discipline should not be questioned by supervisors."