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FCA commits to annual board reviews after closed-book fiasco

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The FCA has agreed to a programme of annual reviews on the effectiveness of its board following a damning report from MPs.

The Treasury select committee slammed the regulator as “dysfunctional” in a March report that criticised its handling of a review into closed-book policies last year.

In a response to the report published this week by the committee, the FCA agreed to a demand for a review of the effectiveness of its board’s role in oversight, identification and management of risk.

The FCA says: “The board agrees that as a matter of good corporate governance it is important that its effectiveness is regularly reviewed, and has agreed it will do so on an annual basis.”

The FCA has already commissioned a report from Tracy Long, founder of Boardroom Review, which provides independent advice on the effectiveness of boards and committees, with results expected later this year.

The FCA says: “The board has further decided to commission an external review every other year, with an internal review taking place in alternate years.”

The committee also called for the FCA to hold itself, as far as possible, to the same principles expected of banks in transparency around leadership through the senior manager’s regime.

To that end, the FCA has agreed to publish “responsibility maps” for senior managers.

Additionally, ongoing suitability of senior executives will be assessed annually through the FCA’s performance management framework.

TSC chairman Andrew Tyrie welcomed the moves, but describes the FCA’s response as “overdue”.

He says: “The committee recommended – among other things – that the FCA should carry out investigations into its standards and culture, its communication methods and the board’s effectiveness.

“It is welcome that the FCA now appears to have accepted the need for this. In particular, the FCA’s work to identify the individual responsibilities of its own senior managers and to clarify lines of accountability is a step in the right direction – an overdue one.”

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Comments

There are 7 comments at the moment, we would love to hear your opinion too.

  1. The worrying thing is, it is this “dysfunctional” organisation that is in charge of deciding what we as an industry must pay in regulatory fees and compensation fund donations, whilst squeezing our income till the pips squeak. On that note, you can guess who is going to pay for these external reviews!! It would be only fair for them to have to disclose the costs, direct and associated, of the review, as we in the financial services industry are their customers, and presumably full disclosure must apply to them too.

  2. How can you regulate conduct in any business when the systems are absent within your own? Seems bizarre.

  3. Guess who’s going to pay for all these audits of process designed and agreed by senior staff who also design and agree process in all financial institutions. It is farcical and a complete waste of public money as it is the poor old consumer that eventually foots the bill for this “protection” against rogue practice. Isn’t it time to actually look at the purpose of the FCA and critically judge their effectiveness against value for money criteria and start chopping out the parts of the empire it’s built that are “dysfunctional” and only allowing them to be rebuild the empire if it can deliver a worthwhile contribution to the organisation’s purpose.

  4. The FCA have agreed that due to their incompetence they will start to do reviews, outsourcing what they can every other year. I would be really interested in how much the FCA would fine themselves given this damning report by the treasury and what impact the cost of this remedial works will have on bonus payments? Full disclosure please. Why has the treasury not questioned retrospectively why senior management took bonus payments in recent years when they are found to be dysfunctional……pay the bonus payments back please.

  5. I see this as more of a, begrudging olive branch to Mr Tyrie and the TSC, a; We will do as you want and not dismiss you (the TSC) out of hand, ended with a hearty snort of derision !

    But really ? is this want we want our regulator to be doing…… there is enough useless reporting being done at the moment, and there are more far reaching issues with in the FCA that need addressing, I fear the “responsibility maps” will fill the bins by the side of many a desk !

  6. The FCA should be excluded from the new Financial Advice Market Review because any sensible review would decide that the FCA should be abolished and replaced with a small, low cost regulator and a FOS that could be accountable to the courts.

  7. What, if any, external body will oversee and scrutinise these reviews? What action will be ordered if recurring faults and failures are identified? They’ll surely talk up all the good things and downplay the bad. Of what value are reviews undertaken by the FCA itself unless analysed by a third party?

    Wasn’t the FSA scrapped and replaced (in practice, just re-badged) for being so chronically dysfunctional? Nothing seems since to have improved, despite Martin Wheatley’s claim that the FCA would be “a very different animal from its predecessor”. If anything, the FCA has performed even worse than the FSA. And that’s not just some lone agitator out here in the provinces throwing stones ~ it’s what MP’s are saying. Was supposed to do better but plainly hasn’t.

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