When it comes to the banking culture review, which way will the FCA pendulum swing?

Haydn Lightfoot
(FILES) British banking group HSBC's Lon
This meeting could be the tipping point for how the FCA approaches British banks (Source: Getty)

Tomorrow MPs will grill the heads of the Financial Conduct Authority (FCA) as to why its inquiry into bank culture was scrapped.

As the FCA searches for a permanent chief executive, this meeting could be the tipping point which decides how the regulator approaches British banks in the upcoming year.

The question being asked is where will the FCA position itself between being authoritative or collaborative? When facing questions from the Treasury Select committee, the FCA will need to strike the right balance between the two, while also reaffirming its commitment to protecting the reputation of the UK’s financial services sector, retaining its appeal, promoting competition and protecting bank customers.

With some banks already debating whether to keep their headquarters in the UK, the approach the FCA decides to take will be crucial in the next phase of the UK’s economic recovery, as it will the set the tone for relations between the banks and the UK regulator.

In what is likely to be a tumultuous year for the British banking sector, with a possible Brexit on the horizon, this relationship could be more important than ever.

There is little doubt a new approach to regulation is needed for the UK’s financial services sector.

Critical to this is who will be appointed as chief executive of the FCA. Martin Wheatley took an aggressive approach during his tenure as chief executive and his acting successor, Tracey McDermott, has recently announced that it is not a role she currently wishes to take on permanently.

Whoever is appointed in this role will have to navigate a complex stakeholder map if they are to be successful in developing a banking environment that is attractive to the banks and yet still capable of rebuilding the UK public’s perception of the banking industry.

The emphasis on this latter point was well demonstrated by the widespread criticism which followed the FCA’s announcement that it was to drop its investigation into the UK’s banking culture, which subsequently led to tomorrow’s hearing of the Treasury Select Committee to explain why.

In the coming year, the FCA head will have to ensure the watchdog itself maintains the highest standards.

Just last week, the FCA announced a leak inquiry after the media reported on internal documents connected with the banking culture review.

Soon after, the FCA released news of an independent review, which stated that “recent interventions by HM Treasury and other bodies have raised questions from directors regarding the board’s independence.” Developments like these provide an indication of the focus that maintaining these standards will require.

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