In the dim and distant past, some bankers were a little bit naughty. In fact, some made it into our evil hall of fame, and one or two even got sent to jail as a result. Some notable examples are the Libor fixing scandal, the PPI mis-selling scandal, money laundering, the rate swap scandal, and manipulation of the foreign exchange rates. In response to the barrage of illegal behaviour, the Financial Conduct Authority was set up to keep an eye on the banks. The FCA is (in theory) an independent body, set up in 2013 to replace the Financial Services Authority, to oversee both high street and wholesale banking.
Unfortunately the FCA has been doing its job too diligently. When it has uncovered potential wrongdoing, it has had the audacity to speak out about it. Now the Treasury has had enough of such ridiculous behaviour, and is seeking to put a stop to the bank-bashing. The first step in that was George Osborne firing the previous FCA chief, Martin Wheatley, and replacing him with Tracey McDermott, who has already promised bankers that she won’t encumber them with more regulations.
One thing that the FCA were investigating was whether pay and bonus structures were encouraging individual bankers to misbehave. Examples are Fred Goodwin, who led RBS in to a situation where the government had to buy it out before it collapsed, yet he still walked away with a £693,000 a year pension. We would imagine that the FCA wondered whether some linking between poor performance and pay might have encouraged better performance. But we’ll never know if that is what they were thinking, because their report has been gagged;
The FCA had previously said that the report would be the most significant thing it did in 2015, but shortly before it was due to be published, they decided to quietly work with banks on a one to one basis, to persuade them to “have a cultural change” instead. In repose, Conservative MP Mark Garnier, who is a member of the Treasury Select Committee, responded to the news by going on Radio 4 to question whether the Treasury had too much influence on the FCA (which the Treasury of course denied). George Osborne, who has met with senior bankers over 90 times since taking office did however say that the age of banker bashing was over, and that the UK would aim to be the best place for global banks to have an HQ. Because that worked so well for us before. Mwhahaha.
Update – 5th Jan 2016
The FCA today announced that it would take no action against HSBC for actively helping clients evade tax;
The FCA concluded that while HSBC did break the rules, they have changed their ways since then, so it didn’t need to take any action against them. That means that the only person who is in trouble over the tax evasion is the whistleblower who brought the wrongdoing to public light – he has been sentenced to 5 years in jail for violating Swiss bank confidentiality rules. Mwhahaha.
In completely unrelated news, HSBC are shortly about to conclude a 9 month review in to whether it should move its headquarters out of the UK (and therefore out of the FCA’s control), with the corresponding loss of city jobs that George Osborne is so keen to avoid.