|Posted on April 6, 2014 at 9:15 AM|
There are two 'disclaimers' I must make at the start.
One, I have absolutely no idea what the UK regulator, the Financial Conduct Authority, thought it was doing when it made its annoucement about an insurance probe. It will take weeks for the independent legal review of the affair to be completed. But as Martin Wheatley, its CEO, said "it was not our finest hour" - or indeed, the six hours that it took for clarification.
That having been said, UK Chancellor George Osborne's language and public reprimand of the FCA has been pretty extraordinary. His letter written to the FCA chairman said : "These events go to the heart of the FCA's responsibility for the integrity and good order of the UK's financial markets, and have been damaging both to the FCA as an institution and to the UK's reputation for regulatory stability and competence."
Well, yes. But there is still a lot going on that needs to be addressed "for the integrity and good order of the UK's financial markets" and - apart from this complete and incomprehensible howler by the FCA, it has been doing an extraordinarily good job in winning back public trust, a major component in establishing the UK's reputation.
This weekend's Financial Times has a full page analysis on the FCA that smacks of the insider's view of the City. "A year after it was created with great fanfare, the UK's swaggering new regulator bungled an announcement about an insurance probe, wreaking havoc in the stock market and damaging relations with the Treasury. Bankers sense that sympathy is shifting in their direction" wrote the FT.
"Swaggering", eh? I have read many of Martin Wheatley's excellent speeches and 'swaggering' is not how I would describe them. 'Swaggering' is what bankers do when they think (and know) they can get away with salaries that are quite plainly obscene. Or what the City does when the economic numbers start to point upward and they hope the lure of greed will drown out those interested in setting ground rules for running ethical businesses.
Because here's something very odd about the FT analysis. "Nevertheless, up until last week, it would have been hard to fault the delivery as the regulator aggressively pursued interest-only mortgages.....the trouble for Mr Wheatley is that the political mood has changed.....a year ago, the FCA's heavy fines and vigorous probes went down well with the public and with Mr Osborne. But a combination of brighter economic date and recognition of the financial services industry's role in underpinning that recoivery have led to a pendulum swing in Mr Osborne's view." (my emphasis).
So which is it - a week or a year ?
The City is, after all, famous for both its short-termism, and for the siloed way in which it is run. An economic uptick and an emphasis as the financial sector being the holy grail for recovery is a combination that undoubtedly speaks to it. But it is just that short-term view and the siloed nature of its construct that has been a great deal of its undoing as well - and the public has paid for that, and continues to do so.
What struck me even harder in the face than this story early yesterday morning was the coincidence of it being the end of Responsible Business week in the UK. #RBweek
The UK's Department of Business, Innovation And Skills (BIS) published its response to a consultation on corporate responsibility to mark it. The sub-text was 'making companies more accountable to shareholders and the public.' (my emphasis)
The FCA has done a great deal in its year-long existence -including levying more fines than its predecessor in its first decade -to sit up and make the public take notice, and even start to listen, which is essential to rebuild trust. You can't rebuild it by going for a walk in the park together, it's a very hard grind.
Like an overly eager schoolboy jumping up with the (wrong) answer too soon in the hope of pleasing the teacher, calling Martin Wheatley 'aloof' and reporting him "known as the 'Grey Vampire' by some inside his organisation" (FT piece) seems an excessively quick judgement.
It's also a singularly unhelpful one given the task ahead for the UK's reputation.