The FCA must raise its game following damning report: Greg Wright
Robust regulation must be at the heart of every sophisticated financial system. Without it, there is nothing to stop unscrupulous individuals from preying on the vulnerable and unwary.
New analysis of the UK’s financial watchdog makes for sombre reading. A cross-party parliamentary group, comprising 30 MPs and 14 peers, produced a damning report after examining the performance of the Financial Conduct Authority (FCA) for three years. The report described the FCA as incompetent and in need of urgent reform. The FCA carries out the vital role of regulating the conduct of around 42,000 financial businesses in the UK. To quote its website, the FCA aims to ensure financial markets “work well for individuals, for businesses, and for the growth and competitiveness of the UK economy”.
The report drew from the testimony of 175 individuals including former employees, scam victims and whistleblowers.
“The picture painted is not pretty,” it concludes. The FCA’s actions are seen as slow and inadequate, its leaders opaque and unaccountable, the report said.
The evidence gathered suggests that the watchdog is “not fit for purpose”, with issues “rooted in the way the organisation is being led, conflicts of interest and the culture that the successive leadership teams have created”, the report read.
Victims of alleged pension and investment scams said the regulator failed to protect them or to spot “red flags” at fraudulent financial firms. Other financial sector whistleblowers said they felt the FCA did not do enough to investigate their allegations or prevent misconduct from continuing. The report outlined a number of reforms including the introduction of a supervisory council to assess the authority’s effectiveness, changes to funding, a “no tolerance” policy for lack of integrity and changes to the way senior leadership is appointed.
Chief executive Nikhil Rathi mounted a defence of the FCA, saying it was dealing with “record numbers of financial crime prosecutions” and had become one of the world’s “most evolved consumer protection regimes”. Speaking to BBC Radio 4’s Money Box programme, he said: “We will always stay focused on improving our operational performance, but I don’t think it would be fair to characterise the position as nothing has happened.”
He said the balance of promoting growth, including changes to allow more companies to list in the UK, and consumer protection “requires a debate”.
“That does mean that over time a few more things will go wrong, but the risk appetite in the economy needed to adjust to support the growth that the economy needs.” Mr Rathi said the FCA published more data and was subjected to Parliamentary scrutiny more than “any other regulator in the world”.
The FCA says it sympathises with those who have lost out as a result of wrongdoing but strongly rejects the characterisation of its performance contained in the report. However, these findings, which are based on compelling testimony, simply cannot be brushed aside. If the FCA doesn’t raise its game, discussions will soon shift from reform to replacing the organisation altogether.
Greg Wright is the deputy business editor of The Yorkshire Post