Treasury Committee questions why FCA dropped banking review

The Treasury select committee has asked the City watchdog to explain itself after the regulator backed out of its review into bank culture.

Having earlier last year said the study of behaviour within the banks was one of its most important aims for 2016, the Financial Conduct Authority on New Year's Eve said it would now work with banks individually instead of conducting a comprehensive inquiry.

The influential committee's chairman, Conservative MP Andrew Tyrie, said on Thursday morning that he has summoned FCA chairman John Griffith-Jones and acting chief executive Tracey McDermott to answer questions next Wednesday, 20 January, about the dropped investigation.

Tyrie said the decision to drop the review seemed "curious", but the act of the dropping was not the crucial element.

"What matters is the full implementation of the reforms recommended by the Vickers and Banking Commissions and set out to improve conduct in banks."

"So this session will be a part of the Committee’s assessment of the FCA’s efforts to fulfil the enhanced statutory responsibilities given to it by Parliament over the last few years."

The report was meant to look at whether culture change programmes in retail and wholesale banks were “driving the right behaviour”, focusing on pay.

Its shelving was seen as a further sign that the government and regulators have decided to back away from heavier scrutiny of the banks, whose excesses caused the financial crisis of 2008 and led to billions of taxpayers' cash being poured in to bailout the industry.

Former FCA chief executive Martin Wheatley, who was seen as a hardliner after imposing heavy fines on the banks , was ousted in July by Chancellor George Osborne.

Tyrie acknowledged that the FCA, like the banks, was still completing its restructuring post the financial crash.

He added that the shortcomings in regulatory standards exposed during that time were "almost as bad as in banks".

“Getting it right – securing better protection for consumers and markets while at the same time ensuring they don’t make life unduly burdensome for business, from which everyone would ultimately be the loser – is a big undertaking. The Committee will want assurance from the FCA that it is up to the job."