MPs: FSA must end ‘box ticking and endless data collection’
Parliamentary committee’s Libor report recommends change of culture at the regulator, as well as within banks.
The Treasury Select Committee has called on the regulator to move from “box ticking and endless data collection” as part of a culture shift that should happen alongside changes within the banking sector that should ensure more effective oversight.
Releasing its interim findings into rigging of the London interbank offered rate, the TSC said it is concerned that the Financial Services Authority was two years behind the US regulatory authorities in initiating its formal investigation.
The committee said that this delay contributed to the perceived weakness of London in regulating financial markets and reflected a need to change the culture of the regulator as well as of the institutions it oversees.
Andrew Tyrie, chairman of the TSC, says in the report: “It will be a great step forward if the regulators get away from box ticking and endless data collection and instead devote more careful thought to where risk really lies.
“This could reduce the regulatory burden and, at the same time, provide more effective oversight. It will involve a change in culture on the part of the regulators and is a major challenge for the future.”
Mr Tyrie highlights in his statement that “it is clear” that what was wrong with Barclays, the only bank to have thus been hit with sanctions by regulators, went well beyond Libor and praised the FSA for tackling this in a way that reflected a new “judgement-led” approach.
He says: “The culture at Barclays fell well short of the standards outlined by Mr Diamond in his 2011 Today lecture. The PR and the reality were a long way apart.
“It seems that the FSA was on the case. In explaining what was wrong with the culture at Barclays, the FSA showed some welcome evidence of a new, judgement-led regulatory approach.”
The TSC praises the FSA’s actions in February, when it judged that Barclays’ overall culture, rather than just a particular behaviour, presented a risk.
The report says: “This intervention was not routine or coded. It was a loud and clear expression of the concerns the FSA had about the culture at Barclays and should have been clearly understood by the board.
“This innovative action is also welcome. The episode shows, however, that judgement-led regulation will require the regulator to be resolutely clear about its concerns to senior figures in systemically important firms.”
At the end of June Barclays was fined a record £290m by global regulators for its part in manipulating the Libor rate.
The TSC notes, however, the TSC pointed out that Barclays is just one of many international banks under investigation for possible market manipulation.
The report says: “It is important that Barclays’ serious shortcomings should not be seen in isolation from the possible actions of other banks and we await the results of ongoing investigations.”
It continues: “Urgent improvements, both to the way banks are run, and the way they are regulated, is needed if public and market confidence is to be restored.”