An independent review of the FCA board has warned the FCA board’s powers are “limited” and questions the regulator’s independence from government.
The report follows claims the regulator dropped a review into banking culture after the Bank of England intervened.
In its report, commissioned last summer and published yesterday, Boardroom Review Limited says: “Although constituted as an independent regulator and following the UK’s Corporate Governance Code in many respects, board powers are limited, and its remit is defined by government; this has a significant impact on the role and influence of the board.”
It adds: “All directors are aware that the political landscape is particularly difficult to manage. Recent interventions by HM Treasury and other bodies have raised questions from directors regarding the board’s independence.”
The report also notes intervention and public criticism has impacted negatively on “culture and morale, influencing executive cautiousness, levels of defensiveness, and the willingness to escalate issues and learn from mistakes, as well as, potentially, attracting and retaining talent”.
In October 2015 the FCA committed to an annual review following the closed book debacle that is thought to have led to chief executive Martin Wheatley’s sacking.
Chancellor George Osborne has the power to appoint the chief executive.
Treasury committee chairman Andrew Tyrie says MPs will examine whether the regulator has resolved the issues raised by the review – which was internally published in October – at an evidence session next week.
He adds: “The FCA’s work is extremely important for millions of consumers, and thousands of firms and their employees throughout the UK.
“It performs three roles of the utmost importance: to secure an appropriate degree of protection for consumers, to protect and enhance the integrity of the UK financial system, and to promote effective competition in the interests of consumers. It is essential that it does a good job.”