The FCA has come under fire over its approach to regulating financial services but escaped a vote of no confidence.
The regulator was branded “blundering” and “weak, toothless and anaemic” by MPs angry over the way FCA has treated businesses and consumers.
MPs were gathered to vote on a motion tabled by Conservative MP for Aberconwy Guto Bebb, which stated “this House believes that the FCA in its current form is not fit for purpose and we have no confidence in its existing structure and procedures”.
The debate covered how the regulator carried out its investigation into firms that sold the failed Connaught Income Series 1 fund, as well as the treatment of businesses missold interest rate swap products by banks.
Labour MP John Mann, who backed the motion, was scathing in his criticism of both the Government and the regulator, warning consumer rights are being “ripped away”.
He said: “The FCA ought to be strengthened, but it would appear that it is being weakened. With its culture reviewed, dissipated and destroyed, it is being neutered.”
He added: “The consumer champions in the FCA have been systematically removed over the past four months, leaving none in place.
“One can only conclude that the rights of the individual, the rights of the entrepreneur and the rights of the consumer are being subsumed to the big brother of the Bank of England and the Treasury.
“This leads to a question: are the Government members here listening to the debate really going to be on the side of big brother doing down the entrepreneur, doing down the individual and doing down the consumer, or will they be on the consumers’ side? Big brother is taking over.”
Bank of England deputy governor Andrew Bailey was announced as the new head of the FCA last week.
Speaking during the same debate, Conservative MP Gary Streeter said: “This interest rate swap misselling scandal is one of the greatest scandals in recent decades, but because it is complicated and because it primarily affects businesses and not consumers, it has received insufficient attention from the Government and from the media.
“At the same time as this has been in play, the Government have been more concerned about the survival of the banking system in its entirety and about getting the nationalised banks ready for re-privatisation as quickly as possible.
“I can understand that, but it is perhaps for those reasons that they have not been robust enough with the FCA, whose oversight of this misselling has been weak, toothless and anaemic from the very beginning. This has been misselling on an industrial scale and we have hardly got to grips with it at all.”
Fellow Conservative MP and Treasury committee member Mark Garnier agreed there is evidence the FCA is “not standing up for the consumers” but argued a vote of no confidence was a step too far.
He said: “Have we perhaps, on occasion, been guilty of what sports commentators do when a poor goalkeeper successfully saves many, many shots, but, when he lets through one crucial goal, is criticised by everybody for not being up to the job?”
Garnier also pointed to the “successes” of the FCA, citing substantial fines levied in relation to the Libor scandal.
In addition, he suggested the Treasury committee could be given a power of veto over the appointment of the next FCA chief executive to ease concerns about Government interference.
And Conservative MP Jacob Rees-Mogg warned: “The motion is really serious. It says that we have no confidence in an arm’s length independent regulator that this House established just three years ago. If we really mean that, we ought to be legislating to create a new one.
“We should not simply pass a motion; we should say that the body has failed, that it will be abolished as of 1 April and that a new one will be created.”
He added: “A vote of no confidence is the nuclear weapon of Parliament. It is something that brings Governments down. If we pass the motion, it ought to lead to fundamental change at the FCA and resignations, but I fear that we are trying to fire this gun before we have loaded it with gunpowder, and that therefore it will misfire.”
Despite the criticism, Treasury economic secretary Harriett Baldwin urged MPs not to support the motion and the vote was not held.