UK’s financial watchdog branded ‘incompetent’ and ‘dishonest’ by group of MPs

A cross-party parliamentary group, comprising 30 MPs and 14 peers, presented a report to Parliament on Tuesday condemning the UK’s financial watchdog as “incompetent” and “dishonest”.

The chief executive of the UK’s financial watchdog has said criticism of the organisation by the group is not fair.

The group presented the report on the Financial Conduct Authority (FCA) to Parliament on Tuesday, warning that the body needs an urgent overhaul.

Unfair

Chief executive Nikhil Rathi defended the FCA, saying it was dealing with “record numbers of financial crime prosecutions” and had become one of the world’s “most evolved consumer protection regimes”.

Speaking to BBC Radio 4’s Money Box programme, he said: “We will always stay focused on improving our operational performance, but I don’t think it would be fair to characterise the position as nothing has happened.”

He said the balance of promoting growth, including changes to allow more companies to list in the UK, and consumer protection “requires a debate”.

“That does mean that over time a few more things will go wrong, but the risk appetite in the economy needed to adjust to support the growth that the economy needs.”

Mr Rathi said the FCA, whose job is to regulate the conduct of around 42,000 financial businesses in the UK, published more data and was subjected to Parliamentary scrutiny more than “any other regulator in the world”.

MP for Ceredigion Preseli, Ben Lake said: “Far too many of my constituents have fallen prey to pension and investment scams. But this isn’t just an issue for Ceredigion; it’s a problem throughout Wales and indeed the whole of the UK.

“The level of financial crime that ordinary people are exposed to these days is totally unacceptable, and we know the consequences of it can lead to long term financial and emotional carnage for the innocent individuals unfortunate enough to become victims.

“Whilst I don’t just hold the FCA responsible for this failure to protect, it is a matter of fact that the FCA has a duty through Parliament to provide an appropriate degree of consumer protection.

“The regulator just isn’t doing that and this APPG report explains precisely why. Root and branch reform is needed and the FCA must be held to account for the changes that are needed. Change must now be driven through Parliament – if the FCA was willing and able to sort itself out, it would have done so by now.”

Testimony

The report also drew from the testimony of 175 individuals including former employees, scam victims and whistleblowers.

“The picture painted is not pretty,” it concluded.

“The FCA is seen as incompetent at best, dishonest at worst. Its actions are slow and inadequate, its leaders opaque and unaccountable.”

The evidence gathered suggests that the watchdog is “not fit for purpose”, with issues “rooted in the way the organisation is being led, conflicts of interest and the culture that the successive leadership teams have created”, the report read.

The report outlined a number of suggested reforms including the introduction of a supervisory council to assess the authority’s effectiveness, changes to funding, a “no tolerance” policy for lack of integrity and changes to the way senior leadership is appointed.

It concluded that urgent action needs to be taken to address the concerns, or there is a risk that “stakeholders’ patience is exhausted” and discussions will shift from reforming to replacing the organisation entirely.