The U.K. Financial Services Authority has admitted that it didn’t pay enough attention to the quality of corporate governance at financial firms prior to the credit crisis.

The regulator said it had always put a lot of emphasis on good governance but added, “we recognize that our focus on the quality of governance and the intensity of our previous supervisory assessment of it did not adequately reflect its importance.”

The FSA made its admission in a consultation paper setting out its plans to provide more “intrusive” regulation of governance issues in the future.

Among the changes, the regulator gave more detail about its plans to intensify the regulation of key individuals who hold significant governance roles in financial firms, such as the chairman of the audit committee, the head of internal audit, and the chief risk officer.

The FSA is also planning to put more effort into scrutinizing key officials at parent companies that have operating businesses in London, potentially bringing U.S. executives into its approval net for the first time.

In October the FSA wrote to the CEOs of regulated firms warning them that it was changing its approach to approving key individuals. Whereas previously the regulator only checked whether individuals had “the required probity,” it now wants to start looking at their competence, particularly in terms of technical skills. The consultation paper gives more detail about how that will work in practice.

Graeme Ashley-Fenn, the FSA’s director of permissions, decisions, and reporting, said: “Our more intrusive approach continues to place a great deal of emphasis on governance and therefore the senior management at firms. This starts with a firm’s own due diligence. Our experience shows that once a firm gets its corporate governance right; with a strong and effective board, everything else flows from that.”

The consultation period closes on April 28, 2010. The FSA hopes to have final rules in place during the third quarter of 2010.

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