UK MPs seek clarity from Andrew Bailey on London Capital & Finance report
Andrew Bailey, Governor of the Bank of England and former Chief Executive of the Financial Conduct Authority (FCA), has once again come under fire regarding the independent report about the FCA’s regulation of London Capital & Finance (LCF).
Let’s recall that Mr bailey gave evidence to the Treasury Committee on February 8, 2021 on the FCA’s regulation of LCF. Following the evidence session, Dame Elizabeth Gloster, the independent investigator into the FCA’s regulation of LCF, wrote to the Committee about the evidence that Mr Bailey provided.
Dame Elizabeth, has submitted a Letter to the Treasury Select Committee, stating that:
“Mr Bailey’s primary assertion was that my report should “delete the reference to ‘responsibility’ resting with specific identified/identifiable individuals, whether the Executive Directors of Supervision or Mr Bailey.”
This was interpreted by many as an attempt by Bailey to avoid responsibility.
Today, the Treasury Committee confirms that Rt Hon. Mel Stride MP, Chair of the Committee, has written to Mr Bailey to clarify some statements that he made during the evidence session, including:
- The difference between culpability and responsibility with regards to the regulatory supervision of LCF.
- Did Mr Bailey or Dame Elizabeth refer to the FCA as a ‘broken machine’?
- How many calls did the FCA’s contact centre receive, and when could information be extracted from these calls?
- What lessons did Mr Bailey learn from the failings of LCF’s regulation?
- What are Mr Bailey’s views on the financial promotions regime?
- What were Mr Bailey’s prioritisation decisions upon arrival as the Chief Executive of the FCA?
Let’s recall that the Bank of England has issued a statement defending the Governor. According to BoE, Bailey’s legal representations were made in the context of a draft report which was not clear on the distinction between personal culpability or blame, and responsibility.
“At no point, was his intention to imply he did not take full responsibility. As the Governor said yesterday and to Dame Elizabeth, he fully accepts responsibility for everything that occurred during his time at the FCA and welcomed the opportunity yesterday to reiterate that, and his apology to bondholders”, the Bank says.
The Investigation has concluded that the FCA did not discharge its functions in respect of LCF in a manner which enabled it effectively to fulfill its statutory objectives. In all the circumstances, the Investigation concludes that the Bondholders, whatever their individual personal circumstances, were entitled to expect, and receive, more protection from the regulatory regime in relation to an FCA-authorised firm (such as LCF) than that which, in fact, was delivered by the FCA.
The root causes of the FCA’s failure to regulate LCF appropriately were significant gaps and weaknesses in the policies and practices implemented by the FCA to analyse the business activities of regulated firms.