a pensive Andrew Bailey

I have no reason to doubt Al Rush of Philippa Hann’s account of a 2019 meeting with then FCA boss’ Andrew Bailey. Al claims that

“there were a number of times when his [Bailey] head dropped and he had his eyes closed and he appeared to be sleeping”.

If Bailey fell asleep it could have been for a number of reasons but it provides a literal representation for the FCA’s performance over miss-selling of transfer advice and unsuitable products both to BSPS members and to a wider public.

We have a “spokesman” for Andrew Bailey to thank for a denial that Bailey found the conversation tiresome.

 ‘Andrew devoted a huge amount of time to BSPS, ordering a major investigation into the matter by the FCA.

‘He wholly and categorically rejects any suggestion that he did not take seriously the issues raised by those affected.’

But is consumer protection really at the heart of what the FCA under Andrew Bailey – did?. Wasn’t the FCA’s CEO’s  job really been about promoting the British Financial Services Industry globally – as good to do business with. Should its CEO really be bothered by what is at heart a relatively parochial issue involving a relatively small amount of money moving from institutional to retail management to the general benefit of the firms the FCA regulates?

I ask these questions, firmly believing that the FCA should be protecting consumers, but understanding that if your longer term ambitions are to be Governor of the Bank of England ,  the fate of LCF Bondholders,  SMEs banking with RBS or steelworkers confused about their pension options , doesn’t really keep you up at night.

I remember my one visit to the executive floor of the FCA, it had two large clusters of desks, one for Andrew Bailey and the other for Chairman Charles Randell. Apart from these clusters, there were large open spaces that suggested these two executives needed space to think, though I suspect that it had a metaphorical impact on senior staff, I felt these were men apart.

We need a consumer focussed regulator.

A part of me agrees that we need to keep our executive from meddling in local issues. Another part of me asks whether the protection of consumers is just a local issue. The FCA needs a new focus and this blog argues it should be its new consumer duty.

The FCA do not come well out of the NAO report on its handling of the Time to Choose or indeed on subsequent attempts to find redress. They have muddy hands over LCF and other mini bonds , its handling of RBS’s behavior to SMEs was weak. Scamming continues , especially on the fringes of their “regulatory perimeter” where QROPS, offshore bonds and crypto-currencies are used as bait for vulnerable people keen to make money out of novel ideas.

For all that, it is important that we continue to have a “world-class regulator”, I have worked in other jurisdictions and seen alternatives. For all its failings, the FCA is mature and has developed powerful processes which for the main part work.

In mitigation, we cannot judge the FCA in isolation. The FCA can only work within the legislative framework laid down by Westminster, it has to administer the long-term consequences not just of George Osborne’s pension freedoms in 2015 but of Norman Fowler’s A-day in 1988. The latter opened a door to the cash equivalent transfer value which has been causing regulatory headaches ever since.

And the FCA has also to manage the consequences of the other regulator of pensions, in Brighton, whose lack of foresight in requiring deferred  members of BSPS to make choices which would impact their later lives without proper support. It needs to be said again, the BSPS scandal happened because of the Regulatory Apportionment Agreement set up by tPR to protect the PPF from a threat that turned out to be no threat at all.

The new consumer duty should apply to the Pension Regulator as well as to the legislator .

I am no apologist for Andrew Bailey, who I don’t know, or the FCA, who I know better than I did. But nor am I with Gina Miller in her relentless persecution of the man who is now Governor of the Bank of England. It simply does no good to undermine the authority of the people who have responsibility for the reputation of our great financial institutions.

But when it came to enforcing a new consumer duty Bailey would have been “the wrong man for the job“.

We need a proper consumer champion for the new consumer duty.

The Prudential Regulation Authority (the PRA) is the right extension of the Treasury to maintain Britain’s regulatory regime as we go it alone. It works with the Bank of England and the Government Actuary’s Department on matters of gravity that go far beyond the scope of the FCA. Andrew Bailey is much better working in this sphere of policy.

The FCA needs to be the consumer champion that the PRA, GAD and the Bank of England neither set out to be or are capable of being.

And this is why that second floor of the FCA seemed so wrong to me. The FCA is and should be a champion of the consumer and a maintainer of the financial services principle of a “consumer duty” which is held by those who manage and advise on our money, to act in our interests.

So the part of me that agrees that Andrew Bailey and Charles Randell should be cocooned and let be, also asks, “where is the consumer champion that the FCA needs to lead it?”

Nikhil Rathi

Its new CEO , Nikhil Rathi has, after a year in the job, highlighted what he thinks the FCA’s job is. These are the bullets the FCA took from his Mansion House speech last September

• We took extraordinary measures to protect consumers throughout the pandemic. With a stronger economic and employment backdrop, we are now coming through those challenges.

• We are collaborating with international partners to deliver a world without LIBOR, transition to a net-zero economy and maintain high regulatory standards.

• We’re investing to become as much a data regulator as a financial one, working with partners to realise a future where compliance checks can be completed in near real time.

• We call on the financial services sector to partner with us to seize the opportunities presented by the profound forces transforming the sector and society.

He has been handed a number of issues by his predecessor, issues that frankly Andrew Bailey was unsuited to dealing with. It is now incumbent on the FCA to add to these highlights the creation and maintenance of the new consumer duty as it emerges.

I would like to see the Consumer Duty as the FCA’s first priority and for its new CEO to ensure that the FCA gets back the focus on the consumer that his narcoleptic predecessor lost.