A week after the UK cemented its status as a world leader in stupidity by voting to leave the EU, the new boss of the City watchdog finally took up his position.
Andrew Bailey’s arrival at the Financial Conduct Authority (FCA) on Friday, almost a year after his predecessor was ousted, was overshadowed by events that will come to shape and define his tenure.
The challenge Bailey faces was already daunting enough. His permanent predecessor, Martin Wheatley, was sacked by George Osborne in July 2015, a move that seemed inevitable the moment the Conservatives won the general election.
Wheatley was perceived as being too sympathetic to consumers and insufficiently obsequious to the banks. He didn’t stand a chance under a government that had decided the time for “bank bashing” was over.
When Osborne appointed Bailey it was on the assumption that he would be to the liking of the City. The fact that he was able to appoint him without interviewing him underlines the FCA’s struggle to operate independently of the government.
This might all sound very irrelevant to the proverbial man on the street, but it is not. The result of the EU referendum brings a whole new set of problems for Bailey.
The FCA’s resources will be stretched to breaking point. There’s already talk of the lifetime Isa and (hopefully) secondary annuities being placed on the back burner while resources are directed to more urgent matters. The uncertainty and instability created by the referendum outcome will also have implications for mortgage lending, pensions, investments, unsecured lending (particularly if personal debt continues to climb), debt management and insurance.
Companies will be using Brexit as an excuse to lobby for “red tape” to be cut, and this will undoubtedly be employed as an argument by fund firms resisting the shift towards transparency of costs and charges.
The same firms will also see a fresh opportunity to lobby the regulator on its interpretation of rules taking effect in January 2018 under the overhaul of the Markets in Financial Instruments Directive, which have implications for advice, charges transparency and inducements.
The coming months will also see banks re-enter the investment advice market in the form of online services. The regulator is encouraging such innovation, but it can’t be blind to the risk of large-scale mis-buying and mis-selling.
For all their talk of reform, banks have done precious little to improve their culture. A review of banking was ditched by the FCA last year (presumably at Treasury urging), but the Public Accounts Committee recently warned that “the risks of mis-selling remain”, noting the potential for the pension freedoms in particular to trigger “future mass mis-selling”.
Bailey takes the helm of the FCA at a time of great turbulence, uncertainty and political interference.
He will be under pressure to let the pendulum continue swinging back towards the “light touch” regulation that was partly to blame for the financial crisis, but the need for a regulator that acts in the interests of consumers has never been greater.