The head of the UK’s financial watchdog tried to reassure City firms last night that the thousands of pages of regulation that have been heaped on them since the financial crisis would not be added to substantially over the coming years.
At an annual London dinner of regulators and finance workers tonight, Tracey McDermott, acting chief execuive of the Financial Conduct Authority (FCA), said: “I do not think I will get much argument in this room when I say that the intensity and volume of regulatory activity over recent years is not sustainable – for regulators or for the industry.
“We are often told that boards are now spending the majority of their time on regulatory matters. This cannot be in anyone’s interests. If that continues indefinitely we will crowd out the creativity, innovation and competition which should present the opportunities for growth in the future.”
Companies have had to adjust to swathes of new regulations by hiring armies of compliance workers, which has boosted pay for them.
Aside from smothering entrepreneurialism, McDermott warned that some new rules would have unintended consequences.
“But, inevitably, among the many good and rational changes that arise from crises, there will be some that don’t have the intended or expected impact,” she said.
“The benefits an intervention is expected to deliver may not be realised or there may be unintended consequences.”
The acting chief was also cautious that rules that were too strict would deter new firms from entering the market.
“We also need to be aware of the danger that regulation itself protects incumbents from competition”.
McDermott took over the FCA in September after Martin Wheatley was ousted by Chancellor George Osborne, who chose not to renew his five-year contract.
Yesterday, Osborne told a committee of MPs that “Martin Wheatley did an excellent job in creating the FCA but we took the view that he wasn’t the right person to carry on with the next phase of the FCA’s development.”