A City insider at last month’s Mansion House dinner told me the Financial Conduct Authority had become ‘a bit of an embarrassment’ — or rather, that was my bowdlerisation of what he actually whispered. So it comes as no surprise that FCA chief executive Martin Wheatley has resigned, having been told by the Chancellor that his contract would not be renewed. A former London Stock Exchange director and Hong Kong securities regulator, Wheatley has a knack of making enemies: Hong Kong investors, unhappy with his handling of alleged misselling of Lehman Brothers ‘minibonds’, once burned a funeral effigy of him outside his office.
London bankers didn’t quite go that far, but resented his stroppiness and the fact that he had never been a practitioner in their sector. Bank of England and Treasury officials seem to have found him an uncomfortable (not to mention gaffe-prone) colleague — a reminder of their earlier dysfunctional relationship with the Financial Services Authority, from which the FCA descends. And consumers failed to give him due credit for his efforts to protect them, notably by clamping down on payday lending.
Osborne’s ‘new settlement’ for the City, also unveiled at the Mansion House, seems to imply less Wheatley-style persecution of bankers as a tribe so long as they abide by proper codes of conduct and their leaders accept personal responsibility when things go wrong on their watch. There’s also a suggestion that ‘ring-fencing’, separating retail from high-risk trading, might be softened as a reward for better behaviour.
But in reality this new mood of ‘engagement’ is likely to last only until the next scandal. The new corporation tax surcharge on UK bank profits — hitting building societies and challenger banks as hard as big City targets — is an indication that the Chancellor will go on treating the sector as a Punch-and-Judy show when it suits. If the ousting of Wheatley really is ‘a reward to the bankers for backing the Tories’, as widely claimed in website postings, it’s a modest sop by comparison with a £1.6 billion tax-grab. I suspect the real need for ‘different leadership’ at the FCA was much more to do with personality than political positioning; in any case, Wheatley’s interim successor, the former FCA head of enforcement Tracey McDermott, has the reputation of an even more ardent banker-basher than he was.