MPs on the Treasury Select Committee will be able to veto the appointment of the Financial Conduct Authority chief executive, under new powers granted by chancellor George Osborne.
The chancellor has written to the committee’s chairman, Andrew Tyrie, to confirm it will be given these new powers.
In February members of the committee tabled an amendment to the Bank of England and Financial Services Bill which would have introduced the veto.
Mr Tyrie said: “The FCA needs demonstrably independent leadership. Parliament will now be better placed to safeguard the FCA from interference - or the perception of interference - by the Treasury or Treasury Ministers.
“Quangos are acquiring huge powers across government. Unless they are required by parliament to explain their actions to select committees, the risk will be that many will be left unaccountable, in practice, to anybody.”
If the committee does not approve of a potential candidate, it can recommend that it goes to a vote in the House of Commons.
The new powers will not apply to Andrew Bailey, who has already been appointed as FCA chief executive, but will apply to his successors.
Writing to Mr Tyrie yesterday (19 April), Mr Osborne said the scrutiny of the committee will be “important and welcome”.
He said: “I will therefore ensure that appointments to the chief executive of the FCA are made in such a way to ensure the TSC is able to hold a hearing, after the appointment is announced but before it is formalised.
“Should the TSC recommend in its report that the appointment be put as a motion to the whole House, the government will make time for this motion and respect the decision of the House.
“Additionally I will seek, in a future Bill, to make a change to the legislation governing appointments to the FCA chief executive to make the appointee subject to a fixed, renewable, five-year term.”
Simon Morris, a financial services partner with law firm CMS, commented that giving the committee a veto over hiring and firing the FCA chief executive will achieve little in advancing the regulator’s objectives.
“Needing committee approval and especially a parliamentary vote will politicise the appointment, requiring the candidate to field grandstanding questions with crowd-pleasing sound bites.
“Further, dismissal is a nuclear option unlikely ever to be used. A government is more likely – as happened with [ex-FCA chief executive Martin] Wheatley – not to renew the fixed term of appointment.”
