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‘Cut back FCA objectives’

The Treasury select committee says proposals for the Financial Conduct Authority to have a “plethora” of objectives risks confusion and should be reviewed.

The committee’s report into the Financial Services Bill as it stood at the end of its passage through the House of Commons, also warns that the FCA’s accountability mechanisms need improving.

The bill proposes giving the FCA the strategic objective of “ensuring that relevant markets function well” and three operational objectives of “securing an appropriate degree of consumer protection”, “promoting and enhancing the integrity of the UK financial system” and “to promote effective competition for the benefit of the consumer”.

The report says: “The Government’s original aim when framing the FCA’s objectives, was simplicity and clarity. There is a risk this will be lost in the plethora of strategic and operational objectives sitting alongside a number of duties and ’have regard’ requirements. Such a framework could cause confusion.”

The Government believes the strategic objective will focus the FCA’s regulatory culture, ensuring it does not pursue any single operational objective to the detriment of a properly functioning market.

The Treasury has already changed the proposed strategic objective from “protecting and enhancing confidence in the UK financial system” after the TSC said the wording could lead the regulator to maintain a “misplaced” confidence.

The report renews the committee’s calls for measures to improve the accountability of the FCA. It wants it to publish full minutes of its board meetings, to have a duty to provide information and carry out retrospective reviews requested by the committee and TSC preappointment hearings for those put forward for the role of FCA chief executive by the Treasury.

Last November, FSA chairman Lord Turner told the TSC he was “quite favourable” to the idea of the FCA publishing board minutes.

When the Government published the bill in January, it said the FCA’s governance should be “as transparent as possible and appropriate” but that the details should be a matter for the board.

In the bill’s committee stage, Treasury financial secretary Mark Hoban said he has “no objection” to saying the minutes should be published and he would “think about…whether there is a way of including the measure without setting a precedent on the degree of intervention in how boards function, which would be unhelpful.”

The report says: “It is widely argued that accountability mechanisms for the FSA have been seriously defective. Our recommendations therefore require statutory force.”


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  1. Let us not forget that when Lord Turner told the TSC he was “quite favourable” to the idea of the FCA publishing board minutes, he also made plain that he most definitely doesn’t want anything as irksomely inconvenient as reviews by hindsight of the FCA’s actions and failures. That privilege he wants reserved exclusively for the FCA to impose on others. Also, I suspect it’s highly likely that there’ll be official minuted meetings and, in parallel, unofficial un-minuted ones that nobody in the outside world will ever know about.

    The Government may well have said that the FCA’s governance should be “as transparent as possible and appropriate” but that the details should be a matter for the board. In that statement we have a fundamental paradox, because there’ll still be no body with the power to hold the FCA to account for any perceived failures in the transparency and appropriateness of its governance.

    The FCA will remain entirely free to determine its own standards of transparency and appropriateness without reference to anyone else, which is exactly what the TSC is trying to get changed. A classic example is the MAS, launched by the FSA with no industry consultation and even if it had gone through the motions of consultation, all responses would have been kept well locked away from prying eyes and the FSA would have gone ahead anyway with a bland claim merely to have “taken on board” the submissions received. That kind of regulation is neither transparent or appropriate, yet if the FCA, like the FSA before it, is to be accountable only to its own board, then nothing will have changed. So the FCA will be just another unaccountable quango monster with government-sanctioned licence to do pretty well whatever it pleases. It’ll be free to set its own agenda, set its own budget, treat those it regulates pretty much however it pleases, pay whatever bonuses it fancies (anything up to 35% of salary, I recently discovered, having read an extract from the FSA’s staff handbook sent to me by Alan Lakey), spend a million pounds a year on stationery, £567,000 on hospitality, send its senior personnel off round the world on first class, all expenses paid jollies to places such as Korea and China, pay off people such as Clive Briault to the tune of £612,000 when they screw up ~ the list is almost endless, yet nothing is set to change.

    All this talk about transparency and appropriateness without accountability to an Independent Regulatory Oversight Committee, with the power to block FCS initiatives when it considers such action to be warranted (as it might very well have done over the MAS) is just cow dung and hot air.

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