Treasury select committee chairman Andrew Tyrie says the FCA needs to undergo a culture change as big as the banks to ensure the financial services industry is properly regulated.
In an interview with Money Marketing, Conservative MP for Chichester Tyrie says the regulator must change its “box-ticking, back-covering” culture.
He says: “That approach must go. It will require a cultural shift almost as big as the one we are demanding from our financial institutions, particularly banks. That’s a challenge for the FCA and the new team running it.
“We are talking about a complete change in thinking and approach from the regulator. My concern is that, just like banks, while the top level in the regulators get the message their statements may be disconnected to those lower down who implement the rules.”
Since he became TSC chair in May 2010 Tyrie has been at the heart of financial services reform. In the wake of the Libor rigging scandal in July 2012 he was appointed to chair the powerful parliamentary commission on banking standards to improve banking culture.
The commission was packed with political heavyweights such as former Chancellor Lord Nigel Lawson, former cabinet secretary Lord Andrew Turnbull and Archbishop of Canterbury Justin Welby.
Its influential report has had a major impact on banking reform, from the “electrification” of the ringfence to overhauling supervision and remuneration rules.
In line with PCBS recommendations, the Treasury abolished the approved persons regime for banks and building societies.
The new senior managers regime will be a narrower, more intrusive version of the significant influence function focussed on very senior bankers.
Just as important is a new certification system that will see firms identify and certify staff who can harm customers or their business. The FCA will then supervise firms’ certification systems.
Tyrie and the FCA want to go further and apply the new regime to the entire sector, including IFAs and wealth managers.
He says: “The APR has been a disaster, creating the illusion of regulatory oversight of senior staff when, in reality, there has been scarcely any. It’s a business cost with little or no return.
“There is no reason to suppose APR scrutiny is better done in the rest of the financial services industry than it was done in banks. The banking commission looked at the APR in banks very closely and concluded that it was a busted flush.”
While Tyrie has been a powerful advocate of smarter regulation he does not believe in more regulation, insisting that costs must be justified and “the customer always ultimately pays”.
One example is the regulatory demands on financial services firms to provide data, with advisers complaining about the amount of work involved in the retail mediation activities return.
While the FCA has admitted problems it says information is crucial for effective supervision.
But Tyrie says: “There is a great deal of talk about judgement-based regulation but there is not much judgement being used if the regulator is just collecting heaps of data and hoping that one day it can find a way of analysing it that may be of use.”
Andrew Tyrie on..
Mortgage tracker rate hikes
“At first glance there seems to have been considerable consumer detriment.”
“There are clearly some problems… the task now is to give it a little longer to bed down before deciding whether to take a look at it next year.”
“People need to know they can’t collect the bonus and run.”
Bank sales incentives
“Sales-based incentives are just as important to get right as bankers’ bonuses.”
“There is a weakness in the market. We haven’t launched a specific investigation into it but it is something which needs keeping an eye on.”