What’s wrong with CAF?


I fully recognize that the job of a financial services regulator is a Herculean task, protecting the public from the excesses of regulated entities in the industry, as well as the excesses of bad actors outside the industry – fraudsters, scammers, crooks. However, if the Financial Conduct Authority was a regulated entity, it would have been closed.

I remember a 2016 speech from their former Director of Oversight – Retail and Permissions titled “Getting Culture and Conduct Right.” He spoke about changing mindsets and incentives, with the role of all leaders being to foster a culture of personal accountability and impress upon all staff the value of a good culture to the health of their business and of the financial services sector more broadly.

Staff and Morale

Culture is defined from the top and success is intrinsically linked to staff morale. When 60% of FCA’s frontline management team are considering leaving the regulator, there’s a major problem.

The chaotic overhaul of the FCA’s existing bonus system, which effectively meant troops took a pay cut while officers were unassigned, highlights management’s incompetence. To add insult to injury, the FCA is using expensive consultants to cope.

Then there was the decision to move the regulator from Canary Wharf to Stratford. A place that would have made staff feel unsafe with ‘significant concerns’ about ‘knife crime and gangs’. When they moved, there were reports of “verbal abuse, colleagues defecating on the floor in the toilets and leaving bottles of alcohol in the sanitary bins”.

Morale was further damaged by the CEO’s diversity program. Staff progression must be free of bias or prejudice – be it race, gender, sexuality, religion or neurodiversity – but Nikhil Rathi seems oblivious to the damaging impact on morale of his speeches exaggerating discrimination positive.

FCA Board Minutes December 2021 refer to various monthly reports from numerous independent panels – first issue cited is diversity and inclusion, then regulatory changes, then future regulatory framework, then the new duty of the consumer. Is this really the prudent order for a regulator facing numerous scandals, regulatory failures and market challenges?

The top team

There is no doubt that Rathi is a more fluid and politically savvy operator than Andrew Bailey. But is he the right general manager when he appointed Megan Butler to lead the transformation, on a list of only two internal candidates, despite his guilt in LCF, detailed in the Gloster report? He then replaced her with another internal candidate, who already held a full-time post as head of clearances.

What about FCA’s Board of Directors? It is the duty of non-executive directors to provide challenge and oversight to the board to ensure better decision making. Examining published board minutes, there is no evidence of a single FCA board decision being challenged or overturned by an NED. How did the NEDs not insist on an independent review, including the FCA’s own regulatory oversight of the £1billion Woodford scandal? Why didn’t they challenge Charles Randell’s “single and primary cause test” for their complaints system, which the Complaints Commissioner says “frustrates the object and purpose of section 87(5) of the Financial Services Act 2012″?


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