FCA director of authorisations Victoria Raffe admits the organisation came under “massive” political pressure to rubber stamp the sale of 632 Lloyds Banking Group branches to the Co-op Bank.
Speaking at a fringe event at the Conservative party conference in Birmingham yesterday, Raffe also said the FCA is under political pressure “all the time” and it would “ratchet up” towards the election.
Lloyds Banking Group was forced to sell 632 bank branches under EU competition law and the Co-op Bank won a long tender process in 2012.
In April 2013 the Co-op Bank withdrew from the deal as it unearthed a £1.5bn black hole in its capital buffers. The bank has been forced into a bail-in of bondholders.
When asked during a panel debate if she felt under pressure over the sale of Lloyds branches to Co-op, Raffe said: “Personally, no.”
She was then asked if the FCA come under inappropriate political pressure over that deal.
She said: “There was massive pressure and it wasn’t just political it was widespread from the mutual industry to all sorts of areas. It was a pressurised time.”
When asked again if the pressure was inappropriate, Raffe said: “A lot of it we didn’t pay any attention to. We have a decision to make, we are regulators and we try to do the right thing. I don’t think there is a difference between us in what we want to achieve.”
Raffe said she was not aware of any inappropriate political pressure over a 2009 merger between the Co-op Bank and Britannia Building Society.
Former Co-op Bank chairman Reverend Paul Flowers says he was called regularly by former Treasury financial secretary Mark Hoban and came under major pressure from the Treasury to push the deal through. Former NBNK chairman Lord Levene has also said there was significant political pressure to favour the Co-op Bank.
Raffe, who has worked at the regulator for nearly 20 years, was discussing the nature of political pressure at the FCA and whether it will increase in the run up to next year’s general election.
She said: “Of course it will. We feel it all the time. [MPs] exert their right to be as horrible as they like about us and it is our privilege to listen.
“I don’t think as a regulator we have all the answers. I wish we had the benefit of hindsight and we had the chance to make choices again but we don’t. We do our best to do the right thing at the time.
“Sometimes, and you might find this amazing, politicians have good ideas, and sometimes they don’t. We are an independent regulator and we have to make up our own minds. Sometimes that pressure is for good and sometimes the pressure is not – particularly if it was over individual decisions.
“If it was ever proved that politicians pressurised us in the Lloyds/Co-op deal then that would be scandalous. Politicians have no business in individual decisions.”
Conservative MP Mark Garnier praised the FCA for responding to political pressure from the Treasury select committee to improve the authorization process for new banks.