The Financial Conduct Authority’s incoming chair said one concern he has over the Treasury’s accountability measures for the City watchdog is that they could lead to “a lot of process” and hamper its agility.
In a Treasury select committee hearing this week (December 14), Ashley Alder was questioned by MPs on his view of the Treasury’s recently published recommendations for the FCA.
Chancellor Jeremy Hunt has proposed the regulator should, where it can, help the Treasury boost the UK economy and international competitiveness.
Alder said: “Having gone through them all, there’s a lot of it. Conceptually, that’s ok because clearly there’s a relationship between new powers to the FCA and a greater degree of oversight.
“I think the only concern is…the degree to which the detail of scrutiny, or process, can get in the way of agility.”
The new chair used the example of a proposed cost benefit analysis (CBA) panel.
“In principle, I think that’s ok. It’s very difficult to object to the idea of a panel which will be attempting to reconcile the consumer and industry approaches to cost benefit analysis,” said Alder.
“Nevertheless, if there is a panel around this when the FCA is also expected to publish its framework for CBA. And on top of that, interactions with the Treasury and others.
“That’s quite a lot of process.”
Alder was then asked whether the now scrapped call-in power would be a better solution.
He said such a call-in power, which would allow the government to instruct regulators to change rules if deemed in the public interest, was not a substitute for the sort of accountability proposed by Hunt last week.
“The call-in power, in the media, seemed to be positioned at some point as being something more than just ‘use when there’s an emergency, break the glass’,” the new chair continued.
“Which I think then gave rise to concerns as to what was it for? Was there a concern that the regulators were not acting in public interest? Which would be a rather odd proposition considering that’s all they’re meant to be doing.”
Alder acknowledged that the FCA’s acting chair and CEO, Richard Lloyd and Nikhil Rathi, took issue with the threat this call-in power posed to the FCA’s independence.
The committee raised the point that Alder was prepared to take the role in June, when this threat of lesser independence at the FCA was still a real concern.
It asked if Alder was acting chair when the call-in powers were being floated by the previous Tory government, would his opinion be a different one. He responded simply: “No.”
Later in the hearing, Alder referenced the FCA’s incoming consumer duty.
He said the balance between market development and regulation is a “false dichotomy”.
“You should be in a position to ensure standards are high and they need to be for an international financial centre. Unnecessary burdens are limited. And by dint of that you will ensure that there is competitiveness,” said Alder.
