The report gathered responses from 175 people about their interactions with the FCA, which the publishers of the 358-page document called the “biggest” of its kind.
The call for evidence was prompted by concerns following events such as the fallout of the British Steel Pension Scheme and its review into interest rate hedging products. Mortgage prisoners also contributed to the report.
It found that the FCA was “widely seen as incompetent” with respondents saying the regulator often “fails to perform its functions to a reasonable standard”.
The report suggested that this view was “strongly held” particularly regarding its consumer protection remit, with feedback that the regulator was “slow and inadequate” when responding to wrongdoing.
Some respondents claimed the regulator sometimes “acts in bad faith”, saying it was “culturally and economically aligned with banks and other large authorised firms” and therefore not inclined to act against their interests.
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The report said although there was no evidence for all of these allegations about the regulator acting in bad faith, “there are too many for these to be easily dismissed, especially since some others are supported by either circumstantial or case-specific evidence”.
It also said the FCA lacked transparency and accountability, with testimonies suggesting people tried to hold the regulator accountable and found “their efforts have been thwarted”.
The report said: “It is clear that any journey toward rebuilding confidence must be anchored in measures to lift the current cloak of opacity and lack of consequences for failure.”
The regulator also fails to protect whistleblowers, and its “defective culture” runs through the organisation, the report claimed.
Bob Blackman CBE MP, co-chairman of the APPG, said: “The purpose of financial regulation should be to prevent, minimise and mitigate such harms, so far as is possible without impairing competition or choice. Such regulation must be performed to the highest possible standard, to protect consumers and maintain confidence in the financial sector both in the UK and abroad.
“In recent years, a series of scandals have emerged in which financial services firms have stood accused of mistreating consumers and small businesses and the UK’s principal financial regulator, the Financial Conduct Authority, has been blamed for doing too little too late – or nothing – to prevent and subsequently remediate and punish alleged wrongdoing.”
Blackman said it was sad to say that the testimonies recieved suggested there were “significant shortcomings” to the regulator and that it came across as an “opaque and unaccountable organisation, slow to act and even slower to admit it has got things wrong and to change”.
He added: “It is vital that the UK has a financial regulator that is fit for purpose, so it became something of a mission for the APPG to gather evidence about the FCA and to propose remedies to problems identified. Ultimately, we hoped our collective endeavour would find insights that could initiate fresh policy thinking and reform.”
The FCA has ‘learned from historic issues’
The regulator responded to the report, rejecting its claims.
An FCA spokesperson said: “We sympathise with those who have lost out as a result of wrongdoing in financial services, however we strongly reject the characterisation of the organisation. We have learned from historic issues and transformed as an organisation so we can deliver for consumers, the market and the wider economy.”
Government intervention needed
The report made recommendations of how to address the criticism, saying most could be implemented by the FCA while others might require legislation.
It proposed that the FCA leadership introduces a consumer-centric mission statement which would be tested and held accountable by a consumer oversight body, as well as align its reward and promotion system with its objectives and values.
It also said there should be a ‘no tolerance policy’ for a lack of integrity and develop a specialist consumer-facing department for scam victims.
The report also recommended the regulator face up to criticisms.
Additionally, it suggested government intervention might be needed in the form of legislation, with periodic reviews, and the introduction of a statutory Duty of Care.
It also proposed changing the way the FCA is funded.
