FCA: Fit For Purpose?

Yesterday, (26 Jan 2016) 4 new members were elected to the board of independent regulator, the Financial Conduct Authority. 3 of these new members have a City background. 

A new chairman was also appointed – Andrew Bailey – a senior figure from the Bank of England, where he has worked in various posts since 1985. 

On Monday 1st February, MPs will debate the future of the FCA. The motion was tabled by Conservative MP Guto Bebb who has also been following the cases of several claimants against banks; ‘This House believes that the FCA in its current form is not fit for purpose and we have no confidence in its existing structure and procedure.’

This follows a Treasury Select Committee hearing on 21st Jan where Chairman John Griffith-Jones and acting CEO Tracey McDermott faced questions over whether the regulator was influenced or leaned on by government following news the FCA was shelving an investigation into banking culture, revealed through a leak on New Year’s Eve. 

Robert Jenkins’ partial list of banking mis-deeds as at Nov 2015. See the rest at: http://www.finance-watch.org/hot-topics/blog/1186

McDermott and Griffith-Jones said at the hearing that the investigation was not being dropped, instead that a better approach was being taken to achieve the same outcome, insisting this is why the regulator made no personal effort to inform the public. 

Labour MP John Mann grilled the pair on these changes in light of new emails and papers seen my the TSC. 

From an Executive Committee paper on the FCA approach to culture, Mann read: ‘Changes to the cultural thematic review in banks, our recommendation: we recommend amending the cultural thematic review, a business plan commitment, to align with the approach to culture with the approach to culture in this ExCo paper….I wanted to home in on what the changes actually are. Without this paper emerging, we would not know. We would have no idea, but it has emerged.’

Mann highlighted four major changes to the review which were: 

– No longer publicise good and poor practice

– Exclude the wholesale sector

– No further review of staff concern raising 

– No further testing of firms practices – ‘Feedback may not appear helpful’ if this happens’

‘You are trying to tell us that that is minor are you, Mr Griffith-Jones?’ John Mann

Griffith-Jones insisted the changes were not major because the alternative route of investigation through ‘independent supervision’ would achieve the same outcome in terms of understanding bank culture despite these four huge points. But the approach of ‘independent supervision’ is largely vague and not transparent. 

Further, the investigation would clearly now exclude vital pieces of information such as a letter highlighted by Wes Streeting MP where banking staff raised concerns;

‘I am sure I was not the only Member of the Committee to receive a letter from Affinity, which is the largest independent trade union representing staff working in Lloyds Banking Group and TSB Bank. In their letter, one of the things that is related to their concerns about you dropping this inquiry and concerns about the direction it is heading in, they say, “However, we are concerned that some of the old practices of the past are beginning to creep back into banking and will drive the wrong kinds of behaviours.’

This is a testament to the bureaucratic ways in which the shape and manner of investigations, and actions leading to the culpability of institutions and banks can be altered to shelter the results and hinder transparency. Again, the investigation into and the subject of ‘culture’ within banking was a ‘key activity’ in the FCA’s business plan, and we would not have known about any changes or the shelving of the ‘thematic’ review had it not been for the leak, yet the FCA is able to maintain that the public did not need to be informed and that the changes were ineffectual. 

In fact, Chair of the TSC Andrew Tyrie stated that Griffith-Jones’ comments downplaying the‘market sensitivity’ of dropping the sector-wide review were ‘pretty disingenuous,’ adding the “succession of uncertainties” on the manner in which the FCA has dealt with communications “suggests there is something wrong with the culture of the FCA itself.”

This week, the Times also reported that whistleblowers were ‘betrayed’ by the FCA, through the sharing of sensitive information with banks. We have received evidence the FCA in fact sent our investigation into RBS’ treatment of SMEs to RBS in order to clarify the bank’s stance on claims and to ‘make them aware.’

The FCA also chose to not to take action against HSBC earlier this year, in the wake of the Swiss Tax Evasion leaks which saw the Swiss arm of the world’s second biggest bank shelter and hide £78bn in 30,000 accounts. 

Douglas Flint, Chairman of HSBC said the leaks were a ‘source of shame and reputational damage’ despite himself previously owning a secret Swiss bank account to shelter £5m. Flint has also tiraded against potential bank reforms, once saying they would make banks ‘risk averse.’

This was amid protections offered by UK government too, with anonymity and immunity from prosecution afforded to the clients involved in the scandal for a small recovery of £5bn. 

Meanwhile,  whistleblower Herve Falciani, who leaked the accounts to authorities including France and Britain, was sentenced to 5 years in prison by the Geneva police at the end of last year.

The FCA board announcements also enraged HSBC whistleblower Nicholas Wilson, whom we interviewed at the end of last year. Wilson has spent 12 years trying to expose the application of illegal and made up charges onto customer store cards, in a scheme which involved HFC – a subsidiary of HSBC at the time and a string of high street stores, including John Lewis. It is only recently that the FCA told Wilson that they would review their decision to take no action – admitting that there were serious problems with the handling of his case. But the appointment of board members from both HSBC and John Lewis do not fill Wilson with confidence in the new review of his case. 

Please sign the petition to re-open the investigation into banking culture here

We will be following up investigations and whistleblowers here at Real Media.

You can read our interview with Nicholas Wilson here. 

You can read our RBS investigation here.