The Financial Conduct Authority (FCA)’s acting chief executive has commented on the amount of time that firms devote to compliance matters.
Tracey McDermott made her remarks to the City Banquet in late October 2015. She said that the current volume of regulatory activity was unsustainable, before commenting:
“We are often told that boards are now spending the majority of their time on regulatory matters. This cannot be in anyone’s interests. If that continues indefinitely we will crowd out the creativity, innovation and competition which should present the opportunities for growth in the future.”
However, she did speak with a sense of pride when saying “conduct is firmly on the agenda in the boardrooms of financial services companies.”
She admitted that the banking crisis and numerous conduct issues at authorised firms “highlighted fundamental errors” made by both the firms and her organisation.
Ms McDermott went on to say that she hoped to avoid “pendulum shifts” in regulation in the future. Previously, long periods of light touch regulation have given rise to serious issues, which then required tough action to sort out. But as memories of these incidents faded, and the economy recovered, the general appetite for tough regulatory action reduced, and so the cycle re-commenced once more.
“We become caught in a loop where we regulate, deregulate, repeat on an infinite cycle. And if we do that, if we take too big a step back when things are going well, then history suggests we will fail to anticipate and prevent the problems of the future,” said the FCA chief executive on this subject.
Going on to describe how she had spent much of the last few weeks talking to industry figures and others about these issues, Ms McDermott then used sporting terminology to explain that, in her view, the FCA carries out each of the following roles:
• Referee – ensuring the players, i.e. authorised firms, abide by the rules. However, she also spoke in this section of the speech of the need to ensure competitive markets were maintained
• Groundsman – ensuring that the pitch on which firms operate, i.e. the FCA’s rules, is suitable. Here she spoke of the need “to look at rules which are not working and be prepared to change them”. Examples she gave were the recent changes in retirement risk warnings firms were required to give, and the freshly produced FCA consultation on scrapping certain disclosure documents
• Post-match commentator – reflecting on and analysing past events to find new solutions to problems and issues
She concluded that regulators and firms alike had a part to play in ensuring the UK had a “world leading financial services industry known for its integrity and creativity.”
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