The UK’s House of Commons debated, but chose not to vote on, a “no confidence in the FCA” motion last night. For many this was a relief because, if the motion had carried, it would have been based on a false premise and badly damaged the FCA, the City and the UK.
A false premise because, although the FCA was fairly criticised on some matters (for example, a lack of transparency, it’s tendency to over complicate things, and to “gold plate” Directives when it can), it was wrongly criticised for many others (including failing to regulate areas of the market that are outside the regulatory perimeter set by Parliament; making decisions that Parliament itself had only just taken; and taking too long to investigate and take enforcement action in respect of some of the biggest and most complex problems that emerged during the crisis).
And damage because the FCA can only do its job effectively if it has the confidence of the Treasury Select Committee, the House and those it regulates. That confidence may have been undermined by the debate; and would have been destroyed if the motion had carried, especially when the FCA’s leadership team is changing and its critics have no alternative to offer.
This almost certainly gives Andrew Bailey, the FCA’s CEO in waiting, another enormous challenge. There is a clear expectation gap between what Parliament has asked and equipped the FCA to do, and what Parliament and the public think it can and should do. To bring some of the more wrong-headed criticisms to an end, and to restore its reputation so that it can regulate effectively, the FCA will need to develop and execute a clear, “on the front foot“, communication plan so that everyone understands what it can do, and what it will cost (in cash and legislative terms) if they want it to do even more. It will be interesting to see how the FCA responds, if it responds at all.