Keith Mullin

What do you get when a bunch of people with an axe asks another bunch of people with an axe to give their views on something they’re already hacked off about, in this case, their views on the regulator responsible for UK consumer financial protection?

A step back for context: the bunch of people asking are a lobby group of biased politicians and consumer groups, think-tanks, academics, [Dare I say, righteous?] responsible investment folk, even journalists.

The respondents are ordinary people. But not just any ordinary people. No: they’re all victims of alleged pension and investment scams, of bank misconduct towards small and medium-sized enterprises, misconduct by payments institutions or other non-investment scams, financial services whistleblowers, and aggrieved current and former employees of the regulator. Oh, and mortgage prisoners too. Mortgage prisoners. What a dreadful term. These are homeowners unable to switch to new deals or whose mortgages are in the hands of non-lending debt collectors.

So back to my question. What do you get? Well, what you get is the Report on the Call for Evidence about the Financial Conduct Authority ( FCA ), a seething hatchet-job two-and-a-half years in the making from the Investment Fraud and Fairer Financial Services All-Party Parliamentary Group, a group with no official status in parliament whose stated purpose is to advocate for victims of financial misconduct, crimes, scandals, frauds and regulatory failures.

Readers of my blogs over the years will know that I am hardly the number one fan of financial regulators’ effectiveness, even if I’m at the same time aware that regulating and supervising the financial landscape is in so many ways a relentless, thankless task. I’ve been quick to criticise regulators, in my case in the wholesale/institutional arena rather than the consumer area, in the face of perceived failings, over-reach, or regulation or guidance that doesn’t make sense ( in my view, anyway ).

For transparency, I don’t know anyone sitting on any of the FCA’s executive committees or board so have no personal skin in the game. Nor do I have anything to gain from defending the regulator. So, I can objectively say that while the lobby group’s raison d’être may be a positive one, its report oozes malicious intent.

The editorialized conclusions it draws, based on the comments of 174 angry people – including that the FCA is incompetent at best, dishonest at worst; slow to act and even slower to admit it has got things wrong and to change; that its leaders are opaque and unaccountable – are pretty belligerent. The FCA, the report screeches, is not just drinking in the last-chance saloon, the bar is about to close and the regulator is at risk of being thrown onto the street. ( I bet the authors loved coming up with that last one. )

I suspect the takeaways were crafted before any evidence was gathered. Given the authors didn’t speak to any of the millions of people in the UK who have not been victims of fraud or financial loss via other means who, most likely, have no particular view of the FCA or may have a positive view of the FCA, the report is a travesty. The lobbyists’ ire is not targeted at FCA staff: the authors have their laser sights trained on the heads of the FCA leadership in a pointed, targeted, undisguised manner.

They employ language that is so inappropriate and over the top that it ends up being more of a reflection of the motley bunch of individuals who make up the group that authored it than a considered reflection of the true state of UK consumer financial protection regulation and oversight.

Its almost 60 proposed remedies to a number of its own concerns fail to offer any properly thought-out suggestions that will lead to a clear, obvious and material improvement in consumer protection. One remedy: “Replace the FCA’s Leadership Team” doesn’t merit a response. Others ( “the regulator must regulate”; “the regulator must investigate and enforce” ) are just trite.

I gather the FCA was not given the courtesy of being sent an advance copy of the report, let alone was asked to respond to the findings. The agency’s after-the-fact response – that it doesn’t recognize the findings – are hardly surprising yet have been criticised as defensive. In the circumstances, I’m not sure what other immediate response they could conceivably have come up with.

Is the FCA perfect? Of course, it isn’t. But neither is any financial nor any other regulator anywhere in the world. Let’s face it: when money is the commodity up for grabs, you can bet your bottom dollar that scammers, fraudsters, chancers and organized criminals will do their damnedest to spoof it away from those who have it. That, alas, is the world we live in and have done since the dawn of financial services. It’s a world where scamming is a whole lot easier with the rise of the Internet and digitalization.

So, to the six-million-dollar question: is it realistic to expect regulators and supervisors to hermetically seal the financial services industry at all times so people with bad intentions are kept out? Sad to say, it isn’t.

What we need now, especially as the UK government pushes for a lighter regulatory touch amid a new remit away from risk towards growth is a hard, measured look at what minimum safeguards are needed to preserve financial stability and protect users of financial services from harm in this new world. Bombing the regulators’ executive suite is not a credible response and gets us nowhere.