'Regulatory creep stifles innovation'

 

Andrew Bailey is due to take up the post of Chief Executive of the FCA in July, moving across from the Bank of England, and I have no idea what he will be earning. But if we look back a year or so to when Hector Sants stood down, it was widely alleged in the media that his remuneration for the year amounted to a bonus of £115,000, as well as a £500,000 salary, £60,000 pension and other benefits worth almost £132,000. I suppose that gives us some idea of what Mr Bailey can expect. But how did this come about for Sants, the man at the helm of an organisation that failed spectacularly to do its job?

 

The answer to that rhetorical question may be lost in the mire of the financial crisis, but it still raises my hackles, particularly as last year the FCA was discussing a round of new thematic reviews, one of which could look at broker remuneration - prompting the rhetorical question “what?” – Instead, why don’t we take a look at remuneration at the FCA?

 

Those of us who can remember the 1980s, the collapse of Barings Bank and the formation of FIMBRA, could be forgiven for believing that the UK’s financial regulation is in danger of becoming a behemoth with a bad attitude, as reflected by one-time FCA Chief, Martin Wheatley, who announced that he would “shoot first and ask questions later”.

 

Mr Wheatley eventually got his marching orders and we have been assured of a more considered regulatory approach. But, unfortunately, not an approach that would allow the FCA to benefit from a much-needed relocation. As I see it, the FCA is symptomatic of a London-centric mentality and the divide between what is happening in London and the South East and what is happening in the rest of the country.

 

I have sometimes wondered whether the FSA investigation at Northern Rock in the run up to the bank’s collapse was conducted by people who were disorientated by the journey north and confused by a Geordie accent. Or maybe they were seduced by it – Geordie is, after all, thought to be the most attractive accent in the UK! 

 

But seriously, on a cost basis alone, a move out of London is worth considering. If HMRC can decentralise, why can’t the FCA? Particularly as large numbers of the businesses it regulates are not headquartered in central London - brokers, building societies and the like. As an industry, we need to be looking for better value rather than looking at increased fees.

 

Finally, while it’s difficult to establish just how many people the FCA employs, I have a suspicion numbers will have risen from the 2,900 projected for 2013. That figure came to light under a freedom of information request submitted by IFAonline. In theory, staff numbers should be falling, given the FCA claims to be effective at driving rogues out of the industry. But I doubt that is the case, and I have a strong sense that “regulatory creep” is behind any extra staffing. As we all know, regulatory creep stifles innovation.