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FCA: We came under ‘massive’ political pressure over Co-op/Lloyds deal

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.

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Comments

There are 10 comments at the moment, we would love to hear your opinion too.

  1. “I wish we had the benefit of hindsight”!!!

  2. E L Wisty (an only twin) 1st October 2014 at 3:20 pm

    In my naivety, I had assumed that the point of the FCA being unaccountable to anyone, was to free them from political pressure.

    So, if this is not the case, can we look forward to a time when our esteemed regulator will be held to account?

  3. I feel it very unfair for an FCA spokesperson to say “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.” Without being accountable for those errors. After all, many companies and advisers all try and do it right first time but when they don’t they are fined, suspended or barred totally from the industry. What happens to the regulator when they get it wrong…………….NOTHING!!!!!

  4. E L Wisty (an only twin) 1st October 2014 at 4:06 pm

    @ Derek

    Well said.

    Furthermore their protestations of innocence are somewhat difficult to swallow; in the aftermath of the CF Arch cru debacle.

  5. Nick Pilkington 1st October 2014 at 4:57 pm

    I do like the tongue in cheek comment from Mark Garnier.

  6. Given that the FCA is just another branch of government (having quietly dropped the FSA’s completely phoney claim to be independent), it’s BOUND to be under pressure from Whitehall to do what the Treasury wants it to.

    Consider the most recent gaffe committed by the FCA’s resident loose cannon on deck, Clive Adamson, on the FCA’s planned (hatchets and sledgehammers) review of closed book life companies. Osborne (or one of his minions) quickly dashed off a stroppy letter to Wheatley demanding an explanation which, in best government tradition, Wheatley deflected by commissioning a £2.2m “independent” investigation that’ll take so long to report its findings that by the time they’re made public, the whole business will have blown over and become yesterday’s news. Way to go, Martin.

    Were the FCA in any way independent, Wheatley could tell Osborne that the FS industry is levied to excess and that the money for Osborne’s ill thought through Guidance Guarantee will have to be found from somewhere else.

    Yet, perversely, the one and only government body from which the FSA really IS independent is the very one to which it’s actually supposed to be accountable! Hey, hey, you could hardly make it up.

  7. Funny how political pressure is a one-way street.

    I await the results of the whitewash…I mean investigation into the Adamson Affair where we will find he was mis-quoted, it was all the fault of the dastardly reporter and another £2.5m of industry funds has been urinated against the expensive E14 walls and murals.

    Oh, then they can safely pay themselves the currently shelved bonuses.

    Ooh, am I too cynical or what?

  8. E L Wisty (an only twin) 1st October 2014 at 6:04 pm

    @ Derek

    Well said.

    Furthermore their protestations of innocence are somewhat difficult to swallow; in the aftermath of the CF Arch cru debacle.

  9. I have to be honest and say I thought the answers Victoria gave to the questions were very well put ! (maybe she should take Ms Crooks to one side and give her some tips ?)

    So what we can glean from this is; Conservative government = conservative regulation, Labour government = Labour regulator and so on !!!

    Hardly independent, and too political ? and it has been said many times before deniability is easily demonstrated from all four corners; treasury, regulator, FSCS and then FOS

    Democratic ? not on your nelly !!!

  10. [MPs] exert their right to be as horrible as they like about us and it is our privilege to listen.

    “Sometimes, and you might find this amazing, politicians have good ideas.

    Who does she think she is? I know the all powerful Director of Authorisations at the FCA.

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