Andrew Bailey’s performance in front of the Treasury Select Committee has been slammed by campaigner Gina Miller as “breath-taking” for his inability to take ownership for failings under his stewardship as head of the Financial Conduct Authority.
Bailey’s (pictured) appointment as Bank of England (BoE) governor has been met with scorn from industry campaigners, not least Miller, who believe his leadership credentials are tainted by a series of failures as boss of the financial regulator.
Miller and her husband Alan have documented these failures, including the collapse of Woodford Investment Management and the London Capital and Finance mini-bond scandal, in a document published under the True and Fair Campaign which was referred to on several occasions during the hearing on Wednesday.
When pressed on some of these failures on his watch by committee chairman Mel Stride, Bailey drew attention to the FCA having come under increasing strain due to the burgeoning number of firms under its remit. Bailey said this had increased from about 25,000 in April 2013, when the Financial Services Authority became the FCA, to 59,000 currently.
He said the consumer credit sector moving under the FCA’s remit in 2014 had added some 20,000 mainly small firms which brought “problems that had not been in the regulation arena”.
“When I arrived in 2016 that problem was not solved,” he said. “How do you regulate 59,000 firms because it is one of the biggest numbers frankly I know for most parts of the world? The biggest issue has been high cost credit.”
Bailey said he inherited a number of unresolved issues when he became CEO in July 2016.
He added: “We’ve had a huge task on our hands in rebuilding the organisation to take on that challenge. I think it would have been better had it been done earlier.
“I would emphasise that the idea we have been slow, cautious and not done much is not how it looks like from inside the institution.”
‘Deeply upsetting and immoral’
In a statement sent to Portfolio Adviser, Gina Miller said: “We find it deeply upsetting and immoral that Mr Bailey obfuscated, evaded and on occasions displayed a distant relationship with the truth as demonstrated in his evidence to the TSC yesterday. But on reflection this is not surprising as this has been his modus operandi on many of his previous appearances before TSCs.
“It is ironic that just prior to his evidence yesterday it was revealed that an answer he gave to the Treasury Select Committee last year that there was only one other fund that had breached the 10% limit was completely false and the actual number, as revealed in a FOI request, was seven.”
Miller added: “His refusal to be at all contrite was truly breath-taking – he sought to blame everyone but never took ownership for any failings under his stewardship – whether it was the regulatory perimeter, the MP’s, the increase in the number of firms coming under the scrutiny of the FCA or the previous incumbents at the FCA, nobody escaped blame apart from himself and his senior colleagues.”
An FCA spokesperson told Portfolio Adviser the number of breaches Bailey gave at the 2019 June Treasury Select Committee hearing was correct.
They said: “He was referring to where the breach involved a proportion of assets greater than 10% invested in unlisted securities. The FOI that the FT references covered a different type of breach of the 10% rule.”
It is understood there are two limbs to the 10% rule. One is about unlisted securities and the other about securities listed in ineligible markets. One fund in the 12 months prior to June 2019 breached the limit in relation to ineligible markets.
FCA’s vague perimeter
Bailey referred to the FCA’s “perimeter” several times, saying the large body of firms the FCA has to regulate makes it “quite frankly a complicated perimeter”.
“Historically, the FCA has taken the view things that went beyond the perimeter, or came into the boundary of the perimeter, were less of a priority than things inside the perimeter. We changed that and said where we see a clear need to do so and a clear ability to do so, we should intervene.”
Bailey said the regulator’s response to London Colonial and Finance is an “excellent example” of that. “When we did get evidence and acted upon it, we went outside the perimeter.”
When asked by Stride on whether the FCA should have acted sooner on LCF, Bailey said he didn’t know the answer to that question.
When pressed further on why he didn’t know the answer, he said: “Because I must defer to [Dame Elizabeth Gloster] to know the full story of what happened, I don’t want to judge what she is going to find. I’ve gone through the story myself and I said the last time I was in front of this committee there were points when the FCA intervened and a big question for me … was why did those interventions appear to be initially effective then didn’t persist?
“But I have also observed there was a culture in the way historically the FCA has approached it is if it is beyond the perimeter you don’t go there.”
FCA’s ‘institutionalised reluctance’ to prevent harm
Industry campaigner Mark Taber, who regularly flags up adverts on Google for bogus investment products to the regulator, said: “They keep bleating about the perimeter. It’s nothing to do with the perimeter. Because the government’s given the FCA responsibility and the powers to police and regulate all financial promotions.”
The FCA spokesperson said: “As Andrew has repeatedly said, the FCA has no power to direct Google to stop advertising online scams and frauds nor does any other agency. This is why he strongly believes this should be covered in the online harms bill.”
Taber reiterated his view that the Bank of England is much more suited to Bailey than the FCA.
“I just don’t think he gets some of these things which have problems with the FCA for whatever reason, but he’s been there long enough to know if he doesn’t get it, to get people to explain it to him.
“I just don’t think he really listens about things that he doesn’t want to know about.”
But Taber also said there seems to be an “institutionalised reluctance” at the FCA to act quickly and firmly to prevent harm. “I think it’s because they’d all rather just be dealing with big banks and insurance companies and things that are going nicely, so one day they get a good job when they leave.”
