Tracey McDermott,  Acting Chief Executive of the FCA, and Andrew Bailey, Chief Executive Officer of the PRA spoke at the City Banquet at Mansion House on 22 October. Both used their speeches to reflect on the work done by their respective agencies, and to outline priorities for the future.

Tracey McDermott began by noting that there was unlikely to be any disagreement with her view that “ the intensity and volume of regulatory activity over recent years is not sustainable – for regulators or for the industry”. With this as the starting point, she outlined the roles that the FCA should play in order to move to a period of sustainable stability, without the swings between regulation and deregulation of past years.

Referee, Groundsman and Post Match Commentator

McDermott used a rugby analogy to illustrate her vision of a regulator who, like a referee, enforces the rules but does not interfere with the competition, and is “at the centre of the action, without being the centre of attention”.

Continuing the rugby theme, the FCA as groundsman is perhaps slightly less obvious an analogy.  However McDermott’s vision is that, like a groundsman, the FCA aims to ensure a level playing field and will use all the tools at their disposal (advanced technological tools and financial data rather than rollers and lawnmowers) to ensure they are able to set “clear, consistent and predictable” boundaries.

Finally, like a post-match commentator, the FCA should facilitate and enable debate which reflects on past performance to ensure that successes are repeated and mistakes avoided.

A new era?

The language used by McDermott seems to suggest a move to a new phase of the FCA’s life cycle; a period of consolidation in which the focus is not on the regulator, but on encouraging the innovation and creativity of the financial services industry to take centre stage.


Andrew Bailey’s speech summarised the progress of the PRA and then outlined its areas of continued focus. In terms of progress, Bailey identified three key measures: full, consistent and prompt implementation of agreed reforms, finalising the design of the remaining post crisis reforms and vigilance in identifying new risks and vulnerabilities, and stated that the PRA had made good progress in all three. The development of closer ties with the Single Supervisory Mechanism at the ECB was cited as a particular example of effective co-working between agencies in order to achieve these aims.

In terms of the PRA’s “jobs to finish”, Bailey identified the Senior Managers Regime (SMR), structural reform and ring fencing and competition as the main areas of focus.  Bailey describes the SMR’s importance in identifying correctly those to be held responsible and makes it clear that it is about holding those responsible personally to account.

Bailey spoke more briefly on the subject of structural reform and ring fencing which he stated is well into implementation. Whilst stating the “devil is in the detail”, he also alluded to a degree of flexibility in how the requirements are implemented in order to take into account the different business models and legal structures affected. Bailey also made clear that ring fencing would only go so far and would not interfere with group structures any more than to require the ring fenced bank obeys the rules on ring-fencing in a similar way that banks with overseas subsidiaries operate. The topic of competition was the final aspect of the PRA’s focus and Bailey discussed the challenges of balancing regulation with ensuring smaller firms were still able to operate competitively and outlined the ways in which the PRA are encouraging the EU to recognise this.

In summary, both McDermott and Bailey shared a vision of a move towards a more low key role for regulators, allowing the creativity and innovation of the financial markets to take centre stage but with a focus on long term stability and sustainability. The tone echoed the speech from George Osborne, the Chancellor of the Exchequer, at Mansion House earlier in the year where he made it plain that the age of ‘banker bashing’ must come to an end, realigning himself with the financial services industry and asking them to become part of the solution rather than the problem. This was shortly before the removal of Tracey McDermott’s predecessor, Martin Wheatley as chief executive of the FCA. Wheatley had overseen some record breaking fines against banks and earned a reputation in the City as a harsh enforcer.  This reversal by the government is just another aspect of their new approach to businesses.

However, individuals in the financial services industry need to be more vigilant than ever.  The mission to improve the accountability of individuals working in the financial services industry is still in full swing and is reflected by Andrew Bailey’s comments in relation to the Senior Managers and Certification regimes due to come into force in March 2016.  These will affect  the majority of the banking sector and will cover all investment companies, insurers, asset managers and consumer credit firms by 2018 – taking the number of Senior Managers in firms under scrutiny to 60,000 plus.  Although the most controversial aspect of the new regime, the  “presumption of responsibility” has been shelved and replaced by the so-called “duty of responsibility”, it is clear that while the institutions may be facing a new approach from the regulators, individuals working in the financial sector are still very much a target.