The Treasury select committee has attacked Financial Conduct Authority bosses for the way they announced the end of their investigation into banking culture.
FCA chairman John Griffiths-Jones and acting chief executive Tracey McDermott have been grilled by members of the committee today (20 January) after news emerged late last month that the FCA was abandoning its review of culture at UK retail and wholesale banks.
Andrew Tyrie, chairman of the Treasury select committee, asked Mr Griffiths-Jones whether news about the ending of the investigation was the consequence of a planned pre-briefing, or whether it was leaked.
The FCA chairman denied that it was a leak, but pointed out the letters sent to the banks were not secret.
He also disputed the FCA had abandoned its probe into bank culture, but said it had instead thrown out the thematic review in order to narrow down the investigation by “putting the work on culture back onto individual firm supervision”.
“They came to the conclusion that the way the work was structured was not going to lead to the best way of making progress on culture,” Mr Griffiths-Jones said.
Mr Tyrie also quizzed the FCA boss over internal communications about the decision to scrap the review.
Mr Griffiths-Jones admitted that when the letters about the review were sent out to the banks on the 19 October last year, the board were notified about this decision three days later.
“The decision to hold the culture review was in the board plan,” he said, before pointing out that the board only approves the plan in total and does not know “every sentence” in the document.
Mr Tyrie probed further: “The fact is the board took a decision to hold this review and that decision was overturned without recourse to the board by the executives.”
But both Mr Griffiths-Jones and Ms McDermott denied that any decision had been overturned.
Ms McDermott said the executive makes the operational decisions about what should be taken forward or what should be done differently.
“We thought it was approproate that the board should be notifed and I made the decision and I think that was an entirely appropriate way to do this,” she said.
The Treasury select committee meeting came after an article by the Financial Times suggested Megan Butler, an executive director at the Prudential Regulation Authority, had influenced the decision to drop the FCA’s review after she was seconded in September.
An internal paper published at the end of September showed after moving across to the FCA, she helped draw up plans to abandon the culture probe.
The FCA caused industry uproar after abandoning the review of culture at UK retail and wholesale banks just before New Year’s Eve.
Tony Catt, compliance officer at Peacehaven-based Anthony Catt Limited, said: “The FCA is in a difficult position between the Treasury, MPs and the banks.
“There seems to be nobody in the FCA willing to grasp the nettle when dealing with the banks. It is always difficult to bite the hand that feeds.
“I find it puzzling that MPs with precious little knowledge of financial services or indeed life can really give anybody else a hard time about behaviour and culture.”
katherine.denham@ft.com
