The head of Britain’s financial watchdog has rejected criticism from MPs that he has failed to reform despite years of scandal.
Nikhil Rati, chief executive of the Financial Conduct Authority, said: “The UK is tackling financial crime on an unprecedented scale.”
He was responding to a report by a cross-party group of parliamentarians that said the FCA was “incompetent” and its culture was “getting worse, not better.”
It also accused the FCA of failing to properly investigate the banks and other financial institutions it regulated, and suggested that the FCA may be too close to them.
The report, published on Tuesday, follows a backlash over the FCA’s handling of the Neil Woodford investment scandal and other controversies, including the debanking report.
The article references similar criticism over the years from other reports, including a 2016 paper in New City Agenda that said there was a “deep-seated culture of checking boxes” at the FCA.
The report also refuted suggestions that the FCA had changed.
“It is vital that readers do not fall into the trap of thinking that the FCA has already solved the long list of problems that the hard-won evidence points to, because the FCA has not yet solved them.” the report states. .
However, in an interview with BBC Radio 4’s Moneybox programme, Mr Rati defended the FCA against these claims and insisted the regulator had improved.
“We remain focused on improving our operational performance, but I don’t think it’s fair to characterize this position simply because nothing is happening,” he said.
He added that the FCA has carried out a “record number of financial crime prosecutions” and that the FCA is “one of the most evolved consumer protection regimes in the world”.
The report goes on to say that the FCA may be “captured”, meaning it is too co-ordinated with banks and other financial institutions to act against them. .
It claims there is an “unmanaged conflict of interest” within the FCA because it has a role to both protect consumers and promote economic growth.
The report recommended that the watchdog be removed and replaced with a regulator that focuses purely on consumer welfare, allowing the government to focus on economic growth.
He also called the current leadership “opaque and unaccountable” and suggested that FCA’s leadership should be replaced “as necessary.”
Rati said issues of growth and consumer protection “need to be discussed” but that Finance Minister Rachel Reeves was backing the pursuit of growth.
He acknowledged that boosting growth could mean increased risk for consumers, pointing to changes made to allow more companies to list on the London Stock Exchange and elsewhere in the UK.
“We have been transparent throughout our discussions over the last 18 months that this will introduce additional risk to the system, (but) it has been determined that this is necessary.” said.
“That means a few more things can go wrong over time, but it does mean that the risk appetite of the economy needs to adjust to support the growth it needs.”
On the issue of accountability, Rati said the FCA appears before Congress and some committees and releases more data than “any other regulator in the world.”
A Treasury spokesperson told the BBC: “Many of the issues considered in the report have been thoroughly considered and the FCA has made a number of changes as a result.”
