More progress still needs to be made on delivery effective corporate governance and risk management in the banking sector, the chief executive of the Financial Services Authority, Hector Sants, said today.

Delivering what he said would be his last speech as the head of the regulator, Mr Sants told an audience in London that effective corporate governance was crucial to delivering trustworthy financial markets and institutions.
Inadequate capital and liquidity standards in banking, which had been the main regulatory deficiency pre-crisis, were being addressed, he said, but less had been done to improve the governance and risk management.
'Management are responsible for running firms and ultimately firms fail because of the decisions taken by their boards and their management. These decisions are made within a firm's corporate governance framework,' he said.
'The crisis exposed significant shortcomings in the governance and risk management of firms and the culture and ethics which underpin them. This is not principally a structural issue. It is a failure in behaviour, attitude and in some cases, competence.'
Mr Sants said the crisis had exposed that there were many senior executives and non-executives in key board positions who lacked the technical skills to manage the risks in their banks. The FSA seeks to address this by assessing the suitability of a candidate to undertake a role using the Significant Influence Function interview process.
This ensures an appropriately robust, rigorous and proportionate appointment process is undertaken by the firm, taking into account the overall composition of the board and the individual's knowledge and competence, he added.
'The FSA is certainly not trying to be 'gate keeper' to everyone,' Mr Sants said. 'When we revised our SIF process we made clear that our focus is on the Chair, the senior independent director, the chair of the risk and audit committee and on the principal executive functions: CEO, finance director and chief risk officer.
'Outside of these functions the need for an interview for other individuals is judged on a firm specific basis.'
He stressed, as well, that the FSA did not expect all non-executive directors to be technical experts in financial services or for all board members to have the same level of technical knowledge.
'A diverse board encourages creativity and is less likely to demonstrate "group think" and "herd mentality",' he said.