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Scathing TSC report opens schism between MPs and FCA

A schism has opened between the FCA and MPs over a perceived lack of transparency at the regulator following a scathing report into its handling of the closed-book review.

Last week, MPs blasted the FCA’s handling of its review into closed-book policies, while the watchdog was also forced to yield over publishing reports on its internal auditing processes. 

MPs have voiced concerns about the effectiveness of the regulator’s management as a whole, particularly in following up the Davis Report. FCA chief executive Martin Wheatley and chairman John Griffith-Jones have both been singled out for criticism by the TSC.

TSC chairman Andrew Tyrie described the regulator as a dysfunctional organisation, and raised questions over “systemic weaknesses” at the FCA.

In a raft of recommendations, the committee called for a review of communications and internal working relationships, how the FCAs shares expertise, and its approach to managing risk.

In addition, MPs said the regulator should create a “responsibilities map”, as is the case for banks, clearly showing where senior responsibility lies.

The TSC says it expects the FCA to publish its findings within six months.

Responding to the report, an FCA spokeswoman says: “The FCA is determined to learn the lessons and ensure that this will never happen again and will study the committee’s recommendations and respond in due course.”

MPs questioned whether Griffith-Jones understood the need for impartiality in the Davis Report after he planned for the regulator’s board to conduct an inquiry into the Telegraph briefing, with the assistance of an external law-firm.

After letters from both Chancellor George Osborne and Tyrie, the FCA redrew the remit for Davis’ investigation, but it was not enough to avoid MPs accusing Griffith-Jones of misjudgement.

Meanwhile, Tyrie also criticised the regulator for its response to a request from MPs to share its internal audit reports. Griffith-Jones initially claimed that such a move could hamper its efforts to regulate the industry.

After pressure from MPs, the FCA consented to provide copies of its audit reports one year after they are presented to the regulator’s own audit committee, but added it may use FOI rules as guidelines on whether it can redact information.

Tyrie says:  “The evidence from this episode suggests that there may be broader problems at the FCA, which range far wider than points of process and procedure.

“These include the FCA’s communication methods, possible poor working relationships between divisions, the board’s effectiveness, and insufficient focus by its staff on the FCA’s objectives, among other things.”

MRM head of public affairs Havard Hughes says: “The gloss has come off the shiny new FCA and MPs have become increasingly frustrated with it. My reading of the TSC report is that the committee is not impressed, and they believe the regulator isn’t applying the same standards to itself as it is to outside firms.”

Lansons partner Ralph Jackson adds: “MPs are sure oversight of the FCA from the Treasury has not been as good as it should be.

“There are nagging doubts amongst the minds of the committee as to whether the current management have done sufficiently well to give them confidence that under a new regime they would have a good mandate to continue.”

This is not the first time the FCA has faced criticism from elected officials. The regulator has also been under fire from the Work and Pensions committee, which recommended hiving off pensions regulation to a separate body in order to improve the knowledge base among rule makers.

Dame Anne Begg’s committee reported in early March: “Nothing we have heard in our current inquiry has allayed our concerns about the FCA’s focus and expertise on pensions. The comment from FCA witnesses, previously cited, that it cannot ‘stop fools acting like fools’ was particularly worrying and does not inspire confidence in the FCA’s approach to pension savers.”

“These battles will probably continue post election,” one lobbyist says, while another notes that it is more likely that an aggressive TSC will strain its relationship with the Treasury.

Hughes says: “There’s a lot of potential for it to get a lot worse. MPs clearly don’t like the way Martin Wheatley runs things.”

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Comments

There are 18 comments at the moment, we would love to hear your opinion too.

  1. Griffiths-Jones and “misjudgement” now that’s a word that has followed him around for sometime !

    If you need reminding; HBOS and Co-op !!

    Here is another word (well two actually) that suits him “bloody useless”

  2. E L Wisty (an only twin) 1st April 2015 at 12:06 pm

    The schism isn’t just between the FCA and the TSC. It’s between the FCA and everyone else.

    For many years, in all its guises, the regulatory has shown contempt for the regulated community, the public and its political masters.

    A succession of scandals (almost too many to mention (but certainly including the closed-book debacle, CF Arch cru, the banks, etc …..) has proven that power corrupts, and absolute power corrupts absolutely.

    Wheatley promised to be a new broom. However, he has comprehensively failed, and both he and the execrable Griffiths-Jones should both resign.

  3. Julian Stevens continually raises the issue of an Independent Oversight Committee and this is exactly what is required.

    A body free from the hangers-on and politically corrupt bureaucrats who infest the quangos and committees and who demonstrate an indifference to reality and an appetite for knighthoods.

  4. Has the Treasury Select Committee finally noted that the Emperor is naked?

  5. Its an unaccountable, unelected, buck passing,bullying, diners club. Mr Wheatley, when will the FCA close the loophole, which has allowed the likes of Pension Matters Associates Ltd of Bury and The Henley Benefit Scheme to operate for so long?

  6. Michael.White.BoutiqueCapital - Bridging Loans 1st April 2015 at 1:08 pm

    Very amusing …. “Shoot-First” – ‘Two-Gun’ Wheatley must be pulling his hair out 😀 (What’s left of it….)

  7. Is this the same Martin Wheatley who proposed 7 year jail sentences for senior executives at banks for errors committed by their subordinates?

    I wonder how may years this little infraction warrants!

  8. Jabba The Hutt 1st April 2015 at 1:57 pm

    Responding to the report, an FCA spokeswoman says: “Am I bovverred?……”

  9. Alan: Both you and Julian continually overlook that an IROC would also be stuffed with hangers-on and politically corrupt bureaucrats and would achieve nothing.

    Every regulator is inexorably corrupted by those it regulates and a regulator for regulators would be no different.

    The only way to prevent the FCA, or any government body, from abusing power is to not give it power in the first place.

  10. Well, it makes a refreshing change for all the negatives to be being said by someone other than the regulated community.

  11. E L Wisty (an only twin) 1st April 2015 at 2:38 pm

    @ Sascha Klauß

    What’s the weather like, in La La Land today?

  12. @E L Wisty: 23 degrees and sunny with a light breeze, dropping to 15 degrees whenever you want to go for a run, ever since the Independent Weather Oversight Committee declared that the weather should always be absolutely perfect at all times.

  13. Sascha Klukk always seems to post negative comments about other posters.

    I think that there needs to be a body whose sole purpose is to regulate the regulator.

    Mad as it may sound this could work because we inhabit a mad world

  14. E L Wisty (an only twin) 1st April 2015 at 5:03 pm

    @ Sascha

    Ha! Shouldn’t the relevant oversight committee be the Fair Climate Authority?

  15. Pandora’s Box was opened and the FCA was let loose, now there is no chance of putting them back and shutting the lid.

    A battle of wills between the elected representatives of the people and the self governing body that perpetuates it’s own existence.

  16. Julian Stevens 3rd April 2015 at 4:24 pm

    “The only way to prevent the FCA, or any government body, from abusing power is to not give it power in the first place.” It’s a bit flipping late for that isn’t it? The FCA does need certain powers, otherwise those it tries to regulate would be as free to wave two fingers at it as it is to wave two fingers at the TSC. The issue is not power per se, it’s misuse of those powers.

    Many years ago, the PIA was described by some body or other (I forget now which) as “an unbridled monster trampling roughshod over anyone or any body that dares to try to stand in its way”. Little, if anything, has changed since, which is why increasing numbers of MP’s are becoming increasingly frustrated and angry at the FCA’s brazen contempt for Parliament, whilst Andrew Tyrie is frequently made to look like an impotent fool whose only power is to ask questions with no power at all to do anything if the answers provided are unsatisfactory (as they usually are).

    And now we read that the FCA is not only to provide Parliament with copies of its audit reports a year after they’ve been presented to the regulator’s own audit committee, but is scouring the FOI Act for sections which, in its opinion, will allow it to edit out the bits that it doesn’t want Parliament to see. Is this not a brazen travesty of the openness and transparency that the FCA constantly demands of others? Does it not constitute a prima facie failure to deal with Parliament in an open and cooperative manner? On what basis does the FCA consider itself entitled to demand that everyone else shall deal with it in an open and cooperative manner when the FCA’s own dealings with Parliament are exactly the opposite? What if Parliament doesn’t agree with the FCA’s interpretations of certain selected parts of the FOI Act?

    A Statutory Independent Regulatory Oversight Committee IS needed and desperately. It need not be an entirely new body ~ give the TSC the unassailable powers it clearly needs to impose its will on the FCA and give the FCA a taste of its own medicine with meaningful sanctions for non-compliance such as personal (not FCA-paid) fines and, in extremis, dishonourable discharge from office (without NO compensation for loss of office, such as 6 months fully paid gardening leave).

  17. I really don’t want to take on the mantle of defender of the FCA. However in this case I think the TSC is wrong.

    The Regulator is (and was) right. These life offices are ripping off the public with the old high charging plans and the TSC is in effect sanctioning this. Who laments if Resolution or Phoenix share price drops a few points? (apart from John Tiner and Mr Cowdray).

    Moreover once the Sunset clause comes into effect pray tell which providers will do the honest thing and either rebate the amounts to the clients or reduce charges. Don’t all shout at once.

  18. Quis custodiet ipsos custodes? springs to mind

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