Facing a barrage of questions from MPs during a Treasury Select Committee hearing, FCA chairman John Griffiths-Jones and acting chief executive Tracey McDermott insisted ‘there was nothing secret’ about the fact it decided to drop the review at the end of last year.
Instead of conducting a thematic review of the banking sector, the FCA decided it would work with banks on an individual basis to monitor and improve culture if needed.
Speaking to MPs on Wednesday, Griffiths-Jones said: “I can assure you that culture is and will be top of our list. We are in entire agreement that culture is vital to the subsequent conduct carried out at banks.”
The FCA has been accused of having ‘an ever more soft touch’ on the financial services industry following its decision which came shortly before it announced that HSBC would not be subject to a formal investigation regarding its part in helping rich clients dodge millions in UK taxation.
Speculation has also been raised that the FCA has been acting on Chancellor George Osborne’s orders, after he refused to renew former chief executive Martin Wheatley’s membership to the board.
Andrew Tyrie MP, chairman of the Treasury Select Committee, said the FCA’s handling of the affair reflected wider problems with its effectiveness and communication strategy which its new chief executive would need to address as a ‘high priority’.
“The FCA has a difficult job, and problems like these won’t make his or her job any easier for the new incumbent,” he said.
Addressing the committee on Wednesday, McDermott explained that the FCA had chosen to halt the review after concluding it would not be able to produce something ‘sufficiently useful’ to make it worth spending the regulator’s resource and time.
“We were conscious that there is other work going on in this area, we didn’t think that the statements we would generate from the review would be other than that of motherhood and apple pie.
“Clearly in light of the amount of attention that there has been in the last couple of weeks in relation to this particular decision, I think it would be difficult for me to say there was not a public interest…that is why I have said we need to consider whether we communicate differently in the way we take forward business plan commitments.”
The Treasury Select Committee has now published documents which were leaked to the Financial Times suggesting that a Bank of England official oversaw the FCA’s decision not to continue its thematic review.