Mark wrote the following piece for City AM. It was published in their June 16 edition which can be found here.
This Thursday evening Mansion House once again acts as host to the great and good of the City’s financial services fraternity. Amidst inevitable chatter about the outcome and implications of the EU referendum vote and the darkening global economic clouds, attention will turn to the imminent changing of the guard at the Financial Conduct Authority.
Almost a year has passed since its first CEO, Martin Wheatley, was unceremoniously ousted by the Chancellor. His replacement, Andrew Bailey, is regarded as the ultimate safe pair of hands with a substantial Bank of England and PRA pedigree.
Not everyone, even in the Square Mile, will regard it as desirable that such an apparent institutional insider is now at the helm of UK financial services’ most powerful regulator. As a consequence do not be surprised if Andrew Bailey feels the need early in his reign to strike out in order to dispel such accusations. Watch for a prompt high profile scalp at the commencement of implementation of the Senior Managers’ Regime which is intended to hold top banking bosses to account when things go wrong.
All this is designed to be a clean break from Wheatley’s mixed legacy. By the time the final stint of his un-renewed five-year contract began he had lost the confidence and, more importantly, the respect of many leading figures in the City. Whilst some commentators might regard that as a badge of honour, frankly for an industry regulator to let it be known that he regarded those working in the financial services industry as inherently dishonest was never going to win over City hearts and minds. For Wheatley to be publicly quoted as saying he would ‘shoot first and ask questions later’ in championing consumers against the banks may have been populist playing to the gallery, but sensible regulation it was not. Nor did such a superficially robust approach ever show signs of truly benefiting customers. Famously in 2014 the FCA selectively (and over-) briefed a tale on exit fees on dated pensions policies to a national newspaper and then watched as share prices tumbled. Over £3 billion was wiped off insurance company shares in one morning and the hapless regulator, supposedly overseeing and disciplining those guilty of making price-sensitive disclosures of this kind, took the best part of a working day to realise it had breached its own rules.
This fiasco was compounded by the inability of the FCA to secure fair redress for victims of the mis-selling of interest rate hedging products. Like many of my parliamentary colleagues I have constituents who are still waiting for compensation from the mis-selling of such swaps in the mid-2000s. The regulator’s incompetence has resulted in many aggrieved consumers finding themselves out of time, under the six-year rule, to initiate legal proceedings after the FCA (as successor to the unlamented Financial Services Authority) failed to devise a satisfactory structure for compensation.
Meanwhile Andrew Bailey will be faced by a fairly hefty in-tray when he arrives as Chief Executive in July. Market participants are anxious that after a blizzard of market reviews initiated by the FCA over recent years, there needs to be a consistent message from the regulator about acceptable conduct.
That sense of regulatory uncertainty has been compounded by the FCA appearing to have run a deliberate policy in recent times to deprive even significant players of a clear personal supervisory relationship with a named FCA officer. Understandably at its extreme the presence of specific client management runs the risk of accusations of ‘an overly cosy relationship’ existing between the Authority and the regulated entity. Naturally such concerns appear justified when – as has frequently happened – staff move from being gamekeeper to poacher. Nevertheless for the FCA to regulate effectively on a thematic basis, as it now seems intent on doing, is problematic. Morale at the FCA is at a low point, whilst client dissatisfaction with their operations has never been higher. Something will surely have to give here.
In addition my own constituency casework now includes two instances of overseas financial services groups in despair at the bureaucratic delays surrounding the approval of authorisation process for a subsidiary to commence business in London. This risks impacting upon the relative competitiveness of the City. One Italian investment fund reckoned it would have been easier and quicker to gain authorisation in notoriously bureaucratic Rome or Milan. A lack of qualified regulatory staff coupled with reluctance to act with a sense of commercial urgency risks undermining London’s reputation as an open, outward-looking place to do business.