In a 150-page report published on October 24, Cass Business School and New City Agenda – a think tank set up in 2014 by former Treasury Committee chairman Lord McFall, Lord Sharkey and Brexit Secretary David Davis – put forward 39 recommendations for change.
Sounding a firm reminder to regulators of the task ahead, the report’s authors wrote. “The vote to leave the European Union will mean that the UK will be in full control of its regulation, but it will have significant resource implications for regulators over the coming years. Regulators need to redouble their efforts to change their culture and move away from the bureaucratic and ineffective approaches of the past.”
A large chunk of the report’s recommendations – 21 of the 39 – are directed at the FCA. Suggestions for the body and its chief executive Andrew Bailey include a need to demonstrate their independence from politicians and the financial sector, articulate a clear vision and “take responsibility” for cultural change.
In just a day’s time, Bailey, who took on the top job at the end of June, will aim to do just that when he outlines the agency’s new mission statement to make it more accountable and easier to understand.
A spokesman for the FCA said: “Later this week we will be publishing our Mission which is designed to provide a guiding set of principles around the strategic choices the FCA makes. As part of the Mission we will be seeking engagement with all our stakeholders so that we can set out a clear path ahead for financial conduct regulation in the UK.”
The New City Agenda/Cass report, however, said making the FCA more transparent will be a key challenge.
“Previous attempts to reform the FCA have been blown off course. Leadership changes and the perception of political interference were in danger of making the FCA into a timid and cowed regulator,” the study warned.
The study also proposes that the FCA set up an independent evaluation office, improve its engagement with whistleblowers, give better access to smaller businesses and challenger banks and take strong enforcement against senior executives under the Senior Managers Regime.
Professor André Spicer, professor of organisational behaviour at Cass and the report’s author, said in a statement: “Britain’s financial regulators must change to avoid sleepwalking into another financial crisis that will have a devastating effect on our economy and political system.”
He added: “Just making minor tweaks to the ever expanding rule book is not enough. We need to ensure a meaningful change of culture at our major financial regulators – they must practise what they preach.”
Looking at the regulatory environment overall, the study said that the UK system has spawned a culture of ineffective box-ticking that was costing £1.2 billion a year for administration – six times more than in 2000 – with the FCA handbook costing £3,641 or “the same as a second-hand Mini Cooper”.
Recommendations for the Bank of England included better engagement with the public, conducting an independent assessment of the progress made in its cultural change programme,
The report also called on large banks change their perception of regulatory agencies, who they viewed as “the least intelligent and the most poorly paid in the sector. There is an assumption that if they were any good they would be working in a bank”.