“Things just seemed to go too wrong, too many times,” wrote Tony Hancock in his suicide note. Poignantly, for a man who experienced global adulation, he couldn’t help but focus on insignificant failures.
The outgoing chief of the Financial Conduct Authority (FCA), Martin Wheatley, may reflect on his own subtle dismissal is perhaps founded on a similar outlook, with Chancellor George Osborne concentrating on Wheatley’s mistakes and ignoring the genuine good work he’s done.
Wheatley, arguably is an effective regulator. He has, as they say, pulled no punches, and lived up to his famous ‘shoot first, ask questions later’ gaffe, which he later apologised for. His departure is perhaps the result of misaligned strategies? A tough regulatory leader who requires genuine industry change, pitted against a chancellor who wants to keep the banking sector onside and dump his rather embarrassing banking shares.
Osborne, may also have had genuine concerns at the level of recent fines. The FCA issued £1.4bn in fines in 2014, a 210 per cent increase on the rather paltry £474.2m in penalties meted out in 2013. These fines represent the largest penalties ever handed out by the FCA, or its rather shabby predecessor, the Financial Services Authority.
Chancellor Osborne announced recently the government’s intention to sell its 80 per cent stake in the Royal Bank of Scotland (RBS) at a loss of £7.2 billion. It is apparent that, without its fines, RBS would be a valuable asset. Outgoing Chairman of RBS, Sir Philip Hampton, suggested, with real irony, “without these fines [and redress estimated at £10bn] the taxpayer would be getting their money back”.
Osborne, perhaps, has decided the FCA – which has carelessly lumbered RBS with billion pound losses – requires a more bank-friendly approach, akin to the American regulatory model, which Wheatley scorns.
The FCA has been reviled recently for also blocking annuity reform, and pouring lukewarm, if not cold, water on Osborne’s pension freedoms. Adrian Boulding, Legal & General’s pensions strategy director said recently that “budget changes will be ineffective unless the FCA relaxes its regulatory approach”.
The denouement of Wheatley’s tenure, perhaps began with the closed book review fiasco. The FCA’s ill-timed communication resulted in several insurers’ share prices plummeting. Osborne expressed “profound concern” to the regulator over the handling of its announcement of the review into closed book policies. In his subsequent speech, Wheatley conceded that the regulator’s handling of the issue “was not its finest hour”. With a mounting fee of £3.8 million to investigate the matter, it was a costly mistake.
Wheatley’s style by his own admission is confrontational. When chief executive officer of Hong Kong Securities and Futures Commission (SFC), a role he held for six years, Wheatley was never far from controversy.
In 2009, for example, he antagonised Richard Li, the son of Asia’s wealthiest businessman, alleging shareholder vote rigging, an allegation backed later by the appeals court. 2010 saw the SFC excluding retail investors from the initial public offering of Russian mogul Oleg Deripaska’s aluminum company UC Rusal until it produced a 1,200 page prospectus.
Back in the UK, Wheatley, has come under pressure regarding his remuneration, he received a £92,000 bonus for 2015, taking his total pay to £701,000, five times the salary of the chancellor at £134,565.
Wheatley, an 18-year veteran of the London Stock Exchange, including six years on its board, was the right man, as they say, to lead the FCA. He has shown robust leadership and never faltered in championing the change culture genuinely required in financial services.
Perhaps, for an organisation whose strategy is to punish government-owned banks with gargantuan fines, resulting in awkward, billion-pound taxpayer losses, the incongruity would always result in hostility between the FCA and the treasury.
Together with, arguably, hindering innovation in pension freedoms with a draconian regulatory approach and share-trouncing, press release blunders, it may have appeared to Mr. Wheatley, like Hancock, that things just kept going wrong, too many times.
As an industry we should not forget the great work he has done.
Richard Bishop is a lecturer in financial services at Coventry University College and a practising regulated financial adviser.
