GEORGE Osborne piled pressure on the City watchdog yesterday, demanding to know how and why the carnage in insurance stocks was allowed to happen last Friday.
His intervention came after the Financial Conduct Authority briefed a reporter on its probe of insurance products dating back to the 1970s – but only gave markets a full update after a day of diving share prices.
In an unprecedented move the chancellor wrote a letter questioning the FCA’s actions leading up to last week’s chaos, demanding a high level of detail on the fiasco.
The regulator’s press office, which is led by communications director Zitah McMillan, bore the brunt of the pressure. Osborne demanded a blow by blow account of the delays to the formal announcement, as well as asking who was responsible for the badly-co-ordinated briefing.
“These events have been damaging both to the FCA as an institution and to the UK’s reputation for regulatory stability and competence,” said Osborne’s letter to FCA chairman John Griffith Jones. “I think it essential that the review rigorously addresses questions including: Why and with whose knowledge and authorisation was this briefing given.”
Osborne also asked, “to what extent a false or disorderly market in shares was present during this period.”
The Treasury Committee of MPs also asked the FCA for more information.
It wants to interview the law firm that the regulator will appoint to manage its investigation into the announcement, hoping to ensure the process is independent of the FCA.
“We don’t yet know who will lead the independent inquiry. That decision needs to be taken – and made public – soon,” said committee chairman Andrew Tyrie MP.
“The committee will want assurances that the terms of reference provide no barriers to getting to the bottom of what has happened.”
FCA chief Martin Wheatley has said he will take responsibility for the mess but will not resign.
In reply to Osborne, Griffith Jones said: “The board of the FCA shared similar concerns to your own about the events themselves as well as the potential impact on the FCA’s and the UK’s reputation in financial services. We intend to do everything possible to address that harm by setting up an independent inquiry.”
I am profoundly concerned by the events of last Thursday and Friday... which caused considerable disruption in the trading of insurance shares.
These events.have been damaging both to the FCA as an institution and to the UK’s reputation for regulatory stability and competence. I think it essential that the review rigorously addresses questions including:
Why and with whose knowledge and authorisation was this briefing given, particularly to a single journalist;
Where senior accountability should lie and what disciplinary action should be taken.