It wasn’t so long ago – maybe a year or 18 months – that the light-touch FSA approach to regulation by principle seemed so much more enlightened than the SEC’s lawyer-intensive style with fat volumes of rules.  I contrasted the FSA approach favourably to the SEC several times in various blogs.

Now, that makes you nostalgic for the good old days when people thought a AAA rating meant something, bankers were respected, and central banks and Treasury officials seemed to know what they were doing.

But as Thomas Wolfe famously advised, “You can’t go home again.”

Still, I was surprised at yesterday’s well-attended TSAM conference in London hearing two industry experts say they had concluded it was time for the FSA to give up its principles and clarify requirements through rules.

Tony Kirby, now at Ernst & Young, said it first:

“I’ve decided principles are a bloody mess. No one is quite certain how to put the principles into effect.” You run into problems of the Common Code vs. the Code Napoleonic, among other problems, he said. “It is guaranteed to keep the lawyers and advisors happy. We need clarity on what is useful versus what is a great discussion point.”

Bob Gifford, an independent industry consultant and author who was chairing the session, agreed that principles-based regulation has created problems and its time has gone.

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