The heads of Britain's Financial Conduct Authority will be asked later this month by a panel of lawmakers to explain their "curious decision" to ditch a review into banking culture. The review was part of the FCA's 2015 business plan but last month it was shelved, sparking concern among some lawmakers that the watchdog was under pressure from the government to soften its approach to banks.
Improving the way they operate is seen as core to restoring trust in banks that have been fined billions of dollars over the past four years for trying to rig interest rate benchmarks and foreign exchange markets. The FCA has said that engaging with banks individually was a better way of improving conduct. "The FCA's decision to drop its review of bank culture does seem curious," Andrew Tyrie, chairman of parliament's Treasury Select Committee, said in a statement.
The committee has asked FCA Chairman John Griffith-Jones, and acting chief executive, Tracey McDermott, to appear before it on January 20. It is not the decision to drop the review that is crucial, but the need for the FCA to fully implement reforms set out in a parliamentary report to improve conduct in banking, Tyrie said. The lawmakers will assess the watchdog's efforts to meet the extra responsibilities given to it over the last few years.
"Getting it right - securing better protection for consumers and markets while at the same time ensuring they don't make life unduly burdensome for business, from which everyone would ultimately be the loser - is a big undertaking. The Committee will want assurance from the FCA that it is up to the job," Tyrie said.
The FCA was launched in 2013 with a remit to protect consumers after its predecessor, the Financial Services Authority, failed to spot the costly 2007-09 financial crisis coming or end a string of mis-selling scandals from pensions to home loans. Britain has been among the toughest of banking regulators since the crisis, with the Bank of England and FSA engineering the departure of Bob Diamond as head of Barclays in 2012 after the bank was fined for trying to rig the global Libor interest rate benchmark.
Britain's finance minister, George Osborne, signalled a change in tone last year by calling for a "new settlement" with banks as HSBC decides whether to move its head office from Britain. Osborne has also ousted Martin Wheatley, the hard-line inaugural chief executive of the FCA, whose role McDermott has been temporarily filling. The finance ministry has also eased new rules making top bankers more accountable from next March. Osborne told the BBC on Thursday he played no role in the FCA's decision to scrap the culture review.
"That was a completely independent decision that I had no advance warning of, no foreknowledge of. It's got to be an independent decision for our banking regulator," Osborne said. Osborne, who is expected to name the FCA's new CEO in the coming weeks, also said that McDermott does not want the top job permanently.