A senior Bank of England executive played a major role in the Financial Conduct Authority (FCA)’s decision to scrap a big review into UK banking culture — despite The FCA denying it discussed the move with the Bank of England.
According to a report from the Financial Times, Megan Butler played a key role in scrapping the publication of the investigation, which was shelved at the end of December.
Butler is an executive director at the Prudential Regulation Authority, the Bank of England body tasked with ensuring that financial services firms behave themselves and remain “safe and sound.”
Butler was seconded to the FCA just a few weeks before former boss Martin Wheatley was removed from his position. She was brought in to take the role of head of supervision, after current holder Tracey McDermott was promoted to acting chief executive in Wheatley’s absence.
Documents seen by the FT show that just two weeks after Martin Wheatley left the FCA, plans were drawn up to drop the review, and were circulated internally. Butler was one of the most important figures in creating those plans, according to the report.
Despite Butler’s prominent role in the decision to scrap the investigation, the FCA said in response to a Freedom of Information request, that it had not spoken to any other regulator about scrapping the review: “We did not hold any discussions with the Bank of England, PRA, HMT or any other body about not continuing with the project”.
A snippet from one of the documents obtained under the Freedom of Information Act, was contained in the report The information provided is under the title “Change – no further ‘testing’ of firm practices”. Here’s what it says word-for-word:
- Initial discovery work for retail banks shows that assessing whether consumer outcomes are sufficiently influencing appraisal and pay decisions will be challenging.
- Firms will need to incorporate FCA guidance on performance management and further feedback may not appear helpful.
- We will give individual firm feedback where possible, and use initial findings to focus on next step.
Plans for a major inquiry into banking culture in the UK were first announced by the FCA in its Business Plan 2015/16, in response to a series of scandals in Britain’s banking sector, including the rigging of the LIBOR rate, and the fraudulent selling of payment protection insurance to consumers.
At the end of December, a source close to the FCA told Business Insider’s Lianna Brinded that instead of creating a wholesale report into banking culture, the FCA planned to deal with banks on an individual basis, and would not be publishing its findings, which is pretty unusual for the regulator.
The scrapping of the investigation was met with anger from politicians across the board, especially from those on the Treasury select committee, many of whom argued that the review being scrapped reflects a return to soft-touch regulation, which is often blamed for the extent of the financial crisis in 2007 and 2008. Some politicians also alleged that the Treasury had played a role in getting the review scrapped.
Business Insider has reached out to the Financial Conduct Authority for comment, and will update this post if, and when, it receives a response.