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Regulators’ view: Getting to grips with e-risk

A major priority for the UK's Financial Services Authority is developing a suitable regulatory stance in e-commerce and internet delivery of financial services. Its approach rests on judgements about the potential risks from e-developments to its statutory objectives – market confidence, consumer protection, public understanding and reduction of financial crime – and working out strategies to mitigate and minimize risks. By Lydia Bailey and Crispian Lord

A key principle of the UK Financial Services Authority’s approach to regulating e-commerce and internet delivery of financial services is that it is technology neutral: the same general regulatory principles apply equally to e-commerce as to the regulation of “conventional” financial services. We are not in the business of creating a different or more onerous regime for e-commerce simply because it employs new technical features.

Central to the FSA’s approach is the need for senior managers to have a close grip on their firm’s internet strategy. This applies to the overall business strategy area and to the effective management of operational and security risk – the latter having a strong link to risk to reputation, with the media playing up IT and other glitches in internet delivery much more than in conventional financial services delivery.

The FSA has recently pulled together the results of findings from its market intelligence, on-site and supervisory work. These shed light on e-commerce operational and security controls within firms and provide a picture of emerging best practice.

Senior management awareness

The root cause of many operational problems we see is the immense competitive pressure to be first or at least early into the market.

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