Temporary CEO of the FCA (Financial Conduct Authority), the UK’s main financial regulator, denies bank leniency after deciding in December to abandon a wide-ranging review on banks’ behaviour. Her decision triggered concern regarding political interference, specifically from the Treasury, in the FCA’s supposed independence.
The FCA is a financial regulatory body in Great Britain, which claims to operate completely independently of the Government. It is financed by charging fees to members of the financial services industry.
Tracey McDermott, the FCA’s acting head, who stepped in after hardliner Martin Wheatley suddenly quit in July 2015, told the BBC that her decision to drop a review of the banking industry’s culture was in no way due to political interferences, a gesture of leniency towards banks, or a sign of weakness.
Tracey McDermott, the acting CEO of the FCA, says she is not interested in being the boss on a permanent basis. She was previously Director of Supervision and Authorisations, and prior to that Director of Enforcement and Financial Crime. She joined the Financial Services Authority (FCA’s predecessor) in 2001. (Image: fca.org.uk)
Antipathy towards banks high in UK
Since the 2008 financial crisis, which led to several British banks being bailed out to the tune of hundreds of billions of pounds by the taxpayer, hostility towards financial institutions is close to an all-time high.
Many Britons are exasperated that since 2008 and the giant bailouts, banks of all sizes and types are still mired in scandals and sleaze, ranging from currency-rate rigging, fixing interest rate benchmarks, and paying executives massive bonuses, even in companies with substandard financial results.
Ms. McDermot said to the BBC:
“We’re not going soft on the banks, we’re not being told what to do by the government. If you look at what I’ve been doing in the last six months since I’ve been in the role as chief executive, you’ll see that we have continued to take action against the industry.”
She then cited the ₤72 million fine that was imposed on Barclays last month.
McDermott summoned by Treasury Select Committee
However, MPs (Members of Parliament) from the Treasury Select Committee, which monitors the country’s bankers and regulators, have summoned Ms. McDermott to appear before them on Wednesday, 20th January.
Chancellor George Osborne (right) got rid of FCA boss Martin Wheatley – a hardliner – last year.
She will have to explain to the committee why the banking culture review was ditched, and is likely to face questions regarding concerns about political pressure.
Sir Vince Cable, who was the Secretary of State for Business, Innovation and Skills from 2010 to 2015, and believes the Treasury is pressuring the FCA, told the BBC:
“It was very clearly signalled when the chancellor effectively got rid of the tough regulator Martin Wheatley as head of the organisation. And the organisation has been in something of a turmoil since.”
“We’ve had a whole series of measurers, a weakening of legal sanctions, which suggests that the regulators are expected now to soft pedal.”
Chancellor worried about scaring banks away
In 2015, Chancellor George Osborne called for a ‘new settlement’ with banks. He is said to be concerned that UK legislators and regulators might be scaring banks away – the UK’s largest bank HSBC is considering moving its head office, which is currently in London, to Asia.
The FCA announced it had made a decision not to take any further action against HSBC regarding allegations that it had assisted customers of its Swiss subsidiary to dodge paying tax.
According to the BBC, Ms. McDermott was contemplating reversing a ban on banks paying their staff commission for selling extra products to their retail customers. The ban was imposed in 2013. A large number of customers have won compensation after claiming that bank staff sold them unnecessary products.
McDermot doesn’t want CEO post
On 7th January, the FCA confirmed that Ms. McDermot had decided in early December she did not want to become the regulator’s permanent CEO.
Ms. McDermott said regarding the permanent CEO post:
“I have been at the FSA/FCA for 15 years and I remain extremely committed to, and passionate about, the important work we do. It has been, and remains, a privilege to lead this organisation. However, going through the recruitment process has made me reflect on what I want to do with the rest of my career.”
“As a result I have decided that this is not the right job for me at this stage of my career. This was a decision taken after many months of careful thought and was not one that I took lightly.”