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The British FCA and the withdraw of its banking culture review

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Looking back at the string of scandals in big financial institutions popping up after the financial crisis, it is hard to believe that there is a real change in internal culture of systemic important banks, despite all assurances and some slight efforts that have been made. One is therefore wondering that the British Financial Conduct Authority drew back a review of Britain’s banking culture.

28 January 2016
Martin Aehling

A review of Britain’s banking culture has been ditched by the UK’s financial watchdog only months after its launch, provoking a political after play, as several British newspapers reported:

1 December 2015 – Financial Times:
“Bank of England draws line under bank-bashing”

31 December 2015 – East Anglian Daily Times:
“Financial Conduct Authority’s review of banking culture is scrapped”

31 December 2015 – Financial Times:
“UK draws line under ‘banker bashing’ after scrapping assessment”

31 December 2015 – Politic Home:
“Osborne accused after FCA drop banking culture review”

20 January 2016 – The Telegraph
“FCA chiefs deny Treasury interfered to stop bank culture probe”

In a statement the FCA said: “The initial planning for this thematic review covered a sample of retail and wholesale banks and involved two phases of work, beginning with an initial scoping or discovery phase. As explained further below, we decided to conclude the work after this first phase as we concluded that a thematic review would not be the best way to achieve our desired outcome of continuing to support and drive continued culture change across the sector.”

The FCA has been hit by turbulence since Chancellor George Osborne effectively sacked its chief executive Martin Wheatley in July 2015, see articles:

17 July 2015 – The Independent:
“Top city watchdog Martin Wheatley is forced out by the Chancellor”

17 July 2015 – The Wall Street Journal:
“U.K. rinancial regulator chief Martin Wheatley to step down”

22 July 2015 – The Guardian:
“Martin Wheatley: I had unfinished business at FCA”

Andrew Bailey is becoming the new head of the Financial Conduct Authority, leaving the Bank of England after 30 years.

Some statements from officials suggest that existing requirements for banks are enough now, that the debate over capital regulation is largely over, and that there is no intention of tighter regulation. “There is no Basel 4 … Our objective has never been to raise capital without limit …”, Mark Carney, Governor of the Bank of England, said. Last year Chancellor Osborne called for a “new settlement” to end banker bashing. This was also a signal to stop on financial reforms. Whereas experts at supervisory authorities, political institutions and global economic institutions assess the systemic risks in the financial sector as still high today, especially in the EU. In fact, Basel 3 does not bring major and sufficient improvements to tackle the interconnectedness and riskiness of an unhealthy financial system.

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