Financial Conduct Authority (FCA) bosses defend decision to scrap bank culture review

Lauren Fedor
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The FCA said it would work directly with the banks to improve culture instead of completing an industry-wide review (Source: Getty)

Top bosses at the City regulator have defended their decision to scrap a review into Britain’s banking culture, and denied any Treasury involvement in the move.

Members of the influential Treasury Committee are currently grilling Financial Conduct Authority (FCA) chairman John Griffith-Jones and FCA acting chief executive Tracey McDermott.

Members of the committee had demanded the session earlier this month, after it was revealed at the end of December that the regulator had shelved plans for an inquiry into the culture and behaviour of British bank employees, saying that each lender was unique and could not be easily compared.

The FCA said at the time it had had decided a wide-ranging review would not help achieve its "desired outcomes" and that it would instead work directly with individual banks to promote the "delivery of cultural change".

McDermott defended the decision this afternoon, saying while there is "further to go" in reforming the culture in financial services, a thematic review "was not the right way to achieve that".

"We made the decision, I made the decision, that the thematic review was not the right way to achieve that," she said.

McDermott added that the scrapping of the review was merely "an operational decision about a certain piece of work" and people were mistakenly placing it in a wider context of "what does this say about the organisation and where it's going".

MPs and others have questioned whether the decision had been influenced by the Treasury or McDermott's desire to lead the FCA in a permanent capacity.

But Griffith-Jones told the Treasury Committee today that he has not felt any pressure from the government to soften the watchdog's approach to regulating banks.

"The simple answer is no," Griffith-Jones told committee chair Andrew Tyrie when asked.

McDermott had been hotly-tipped to take on the role after chancellor George Osborne failed to re-appoint Martin Wheatley to the regulator's top job last summer – a sacking Griffith-Jones said had been a "surprise" and hurt morale at the regulator.

Osborne revealed earlier this month that McDermott had not been shortlisted for the permanent job because she "doesn't want the job full-time".

Speaking on Radio 4's Today programme, Osborne said McDermott had been a "very effective interim leader", but that the FCA "needs new leadership to take it into its more mature phase".

McDermott later confirmed that she took her name out of the running to be the regulator's permanent boss in early December.

READ MORE: Culture clash: MPs slam City regulator over banking decision

Nevertheless Treasury Committee member George Kerevan, an SNP MP, demanded this morning that the FCA reinstate the the banking culture review, saying that since McDermott took the reins of the regulator the FCA has "sent worrying signals that it was bending to pressure from the Treasury to return to a more light-touch regulatory regime".

"The cancellation of the inquiry into banking culture is just the latest evidence of the political interferences between the so-called independent regulator and a Tory government that has failed to learn the lessons of the financial crisis," Kerevan said.

“These inappropriate interferences between the FCA and the Treasury alone are worthy of investigation by the Treasury Select Committee and we will use the special hearing on Wednesday to seek clarification from FCA executives on their reasons for abandoning the bank culture investigation."

READ MORE: Which way will the FCA swing on banking culture?

Kerevan's comments came one day after a junior minister insisted that no Treasury officials had discussions with the FCA before it scrapped the banking culture review.

"The Financial Conduct Authority is an independent regulator, no Treasury minister or official had any discussions with the FCA before it took the decision to discontinue this review," City minister Harriet Baldwin told MPs yesterday.

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