UK: Tyrie demands FCA settlements are scrutinised

By added on 04/03/2015

Andrew Tyrie MP, chairman of the Treasury Select Committee, has revealed the government will step in and examine why the Financial Conduct Authority reaches settlements with certain firms, reports the FT Adviser.

The Treasury Select Committee has published the government’s response to its report on the implementation of the Parliamentary Commission on Banking Standards’ recommendations.

In the letter, Andrea Leadsom, economic secretary to HM Treasury, said: “We believe that the work undertaken, alongside the work in hand, is comprehensively addressing problems with banking standards.”

Mr Tyrie, chairman of the committee and former chairman of the Parliamentary Commission on Banking Standards, said the government’s response makes clear that, following HM Treasury’s review of enforcement in December 2014, changes to the current system will be introduced.

“Financial services enforcement was badly in need of reform. And the PCBS’s calls for that reform were initially resisted by the FCA and the Treasury. But Parliament persisted.

“With the reforms announced, enforcement arrangements are now in a better place - the government has taken on board some of the major proposals of the former commissioners. This is very welcome.”

He said the new requirement for regulators to publish ‘referral criteria’, setting out why they have chosen to pursue enforcement action rather than using supervisory tools, and the introduction of a review of settlement decisions by the FCA’s Regulatory Decisions Committee and the PRA’s new decision-making body, are a step in the right direction.

Currently, firms that settle early with the FCA can receive a 30 per cent discount on their total fine.

Mr Tyrie said: “It is essential that regulators do not resort to using enforcement powers as a substitute for engaging deeply with firms through effective supervision. It is also important that the settlement of enforcement cases is subject to appropriate scrutiny.”

However he questioned why the government continues to resist the application of remuneration rules to certain key banking staff - staff who are in a position to cause serious harm to markets, to their bank or to customers.

Mr Tyrie said: “Applying the full remuneration code to those staff would go beyond the minimum international standards. But it is essential for the protection of shareholders and customers that remuneration standards of some sort apply. The government should reconsider.”