FCA ditched review of banking culture triggers protests

The FCA has ditched its review into Britain's banking culture. Picture: Stefan Rousseau/PA Wire
The FCA has ditched its review into Britain's banking culture. Picture: Stefan Rousseau/PA Wire
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A public review of Britain’s banking culture has been controversially scrapped just months after it was launched, with the regulator revealing yesterday that it had opted to work privately with individual banks to address any concerns.

The move sparked protests that, at the perceived behest of Chancellor George Osborne, the Financial Conduct Authority (FCA) was pulling its punches on the industry after several years of “banker bashing” following the

2008-9 financial crisis.

It follows the departure of Martin Wheatley, considered a regulatory hardliner, as the FCA’s chief executive in July, and a dilution of impending rules to hold senior bankers to account personally for regulatory breaches by their banks.

Labour MP John Mann, who sits on the Treasury select committee, said: “George Osborne is behind it, without any question.

“The cultural issues are what lays at the heart of the financial crisis. It’s fundamental. Individuals took irrational risks with other people’s money.

“This decision leaves us hugely exposed into the future because it allows the banks to continue to act as they acted before.”

He added: “George Osborne is bowing to pressure from the banks. HSBC and Barclays have threatened to leave the country, that is what they are privately threatening.”

Conservative MP Mark Garnier, who also sits on the committee, said he was “disappointed” by the decision.

Speaking on the radio yesterday, he said: “There has always been this great argument that perhaps the Treasury is having more influence over the regulator than perhaps it ought to and certainly, if I was looking for a Machiavellian plot behind what’s happened here and the tone of the regulator, then I suppose I would start looking at the Treasury.”

After announcing plans for a thematic review of culture and customs within the UK banking industry in March, the FCA undertook initial work on the project.

However, one source familiar with the matter said that the regulator had decided that publishing the report was not the most effective way to handle the issue.

Public confidence in the big banks has been sharply eroded by a succession of scandals, including rigging of the currency markets and the rate at which banks lend to each other, costing them billions of pounds in fines.

In a statement yesterday, the FCA said: “A focus on the culture in financial services firms remains a priority for the FCA.

“There is currently extensive ongoing work in this area within firms and externally.

“We have decided that the best way to support these efforts is to engage individually with firms to encourage their delivery of cultural change as well as supporting the other initiatives outside the FCA.”

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Conservative Mark Garnier, who sits on the Treasury select committee, suggested Chancellor George Osborne may have been behind the FCA’s move to scrap its review into the UK’s banking culture.

“I am disappointed about it. It remains to be seen whether this is a cancellation or a delay but I fear it probably is a cancellation,” he told BBC Radio 4’s Today programme.

Garnier said there was a “difficult balance” between a strong regulatory regime and “over doing it”.

He added: “There has always been this great argument that perhaps the Treasury is having more influence over the regulator than perhaps it ought to and certainly if I was looking for a Machiavellian plot behind what’s happened here and the tone of the regulator then I suppose I would start looking at the Treasury.

“But I equally think that the regulator has a very, very difficult job to do, which is striking the balance between looking after the people who are its members, the financial institutions, and the consumer.

“And it has certainly been widely talked about that the Treasury thought the regulator was over doing it in favour of the consumer and, certainly from my point of view on the Treasury select committee, I thought otherwise.”