• wblogo
  • wblogo
  • wblogo

Financial Conduct Authority's governance ought to be reviewed, say British MPs

Chris Hamblin, Editor, London, 6 April 2015

articleimage

"It is not clear that the FCA has yet fully grasped the extent of the failings revealed by Simon Davis’s report." This is the damning finding of the UK's Treasury Select Committee as it calls the FCA 'dysfunctional' and in need of review in the wake of the Clive Adamson (pictured) débâcle.

The report by Simon Davis, commissioned by the Financial Conduct Authority's board in the wake of the much-covered Clive Adamson story, was long delayed in the publication over the months of last year. When finally published, its revelations caused enourmous embarrassment to the regulator and about the same time Adamson finally left, to the sound of catcalls.

Davis, of the City law firm of Clifford Chance, remembered who had commissioned his work and resolved not to examine the wider implications of his findings for the FCA and its governance. The latest report, however, has been published with these implications in mind.

Andrew Tyrie and the panel he was chairing suggested: "When the FCA has published the results of the work that we have recommended, the Treasury Committee in the next Parliament should consider whether a detailed inquiry into the governance of the FCA, the effectiveness of its board, the extent to which it is fulfilling its statutory objectives, and standards and culture throughout the organisation, is necessary."

The review that the committee wants, in rough outline, is as follows.

• The FCA's Executive Committee should examine the FCA’s communication methods and poor working relationships between divisions.
• The non-executive members of the FCA's board should investigate whether the FCA has a problem of inadequate sharing of expertise, and whether standards and culture contributed to the events of 27 and 28 March.
• The board should commission an external review of its own effectiveness, particularly its approach to managing risk.
• The FCA should produce a ‘Responsibilities Map’, as it expects banks to do, which sets out clearly where senior responsibility lies. The PRA should produce an equivalent document.

Taken together, Tyrie and his colleagues believe, these things amount to an examination of whether the FCA is suffering from a systemic weakness in standards and culture. The committee expects the FCA to hop to it, publishing its results in six months at the latest.

Condemnations of FCA media management are evident. The report states: "The FCA made no mention of Simon Davis’s investigation when it announced its new strategic approach, and a major restructuring, just two days before it published Mr Davis’s report. The FCA controlled the publication date in both cases. The conclusions of the FCA’s strategic review have the appearance of being rushed out in an attempt to mitigate the effect of the publication of the Davis report on the FCA’s reputation. John Griffith-Jones acknowledged in evidence to the committee that the new strategic approach would not have been published so quickly had it not been for the departure of senior individuals."

It also states that "overall, the FCA failed to meet the minimum standards that it sets for listed firms." Nobody believes that this will ever cease to be the case.

Latest Comment and Analysis

Latest News

Award Winners

Most Read

More Stories

Latest Poll