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Independent review warns of Govt influence on FCA

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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.”

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. No kidding! I wonder who chucked money away funding yet more useless research. This was evident from the day Crash Gordon started it.

    What we have is a situation where the Govt. likes us to think the regulator is independent – so that when things go wrong Parliament can say “It weren’t us Gov. it was them independent regulators”. When things go right (do they ever?) the Govt. can then step in and take the credit and when things don’t go the way that No.11 wishes they can just rearrange the deckchairs.
    And you need research to tell you this?

  2. The FSA’s claim on its website to being independent from the government was nothing but a straight lie and has now been replaced with the somewhat ambiguous “We are accountable to the Treasury – which is responsible for the UK’s financial system – and Parliament. However, we’re an independent body and we do not receive any funding from the Government.” Accountable but still independent? How does that work then? And anyway, it’s common knowledge that the Treasury is the real driving force behind the (mis-named) FAMR ~ it has to be, because clearly the FCA can’t be trusted to run its own affairs in anything remotely approaching a competent manner.

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