UK Members of Parliament blasted the FCA at a Treasury Committee meeting yesterday (21 February), saying that it was simply "not tackling fraud at the moment," while also accusing it of being too close to financial services and warning them against encouraging "socially useless growth".
MP Angela Eagle said to a panel of employees from the FCA and Bank of England that despite the FCA saying it plans to have a higher focus on financial crime and fraud in the future, it would "be hard to have a lower one".
"You are at a very, very, very low starting point as fraud has exploded, so I am astonished you used that example," she said. Sheldon Mills, executive director, Consumers and Competition at the FCA, replied that "we take the criticism, and we will improve".
The committee was on the future of financial services and was primarily focused on whether the government should bring in new objectives for regulatory agencies to consider long-term growth and competition in the market.
Eagle also questioned whether the FCA and others should be valuing the "growth in bankers' bonuses" at the same level of the rest of the UK economy.
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Another MP, Kevin Hollinrake, asked whether it is "good to have people you regulate be giving you such rave reviews," prompting Edwin Schooling Latter, director of Wholesale Markets at the FCA to respond that "I do not think we are in a state of regulatory capture".
Hollinrake went on to add that regulators had been criticised for being both too slow on approval while also being too weak on enforcement, citing the Woodford scandal.
Mills said in response that the FCA acknowledged that "we do have operational challenges on authorisation at the moment," but noted that the ‘gateway' was essential to prevent further enforcement problems later.
He added that "enforcement is not an easy thing to do, as you have to make sure that your case evidentially will stand," and suggested that the FCA had been "too broad" on issues of enforcement and should instead be "more focused".
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Questions over new objectives for regulatory agencies have been hotly debated, with some arguing that even a secondary objective of prioritising growth and competitiveness in the market "could become a primary objectively", according to Vicky Saporta, executive director, Prudential Policy Directorate at the Prudential Regulation Authority, who also testified before the committee.
Saporta said that "although there are clear benefits of the UK getting back rulemaking powers...we also have the possibility of pressure to lower standards" as regulators. Any objective of prioritising growth could eclipse important goals of regulators to protect consumers and ensure market stability.
She concluded that she would not be "doing her job" if she was not concerned over "weak or inappropriate standards or supervision".
Mills stressed that regulation had "definitely been improved since the last financial crisis" and that the FCA did "support a long term economic growth type objective". However, he warned that new rules would not be easy as there is a "range of ways you can start to think about how competitiveness works".
The committee also inquired about financial inclusion, with MP Alison Thewliss bringing attention to the price of poverty in financial services. Mills also noted that "as firms increasingly use algorithms and machine learning," the FCA was keen to expand the regulator's checking on algorithm to prevent discriminatory behaviour.
