Stay informed with free updates
Simply sign up to the Financial & markets regulation myFT Digest — delivered directly to your inbox.
The UK’s public spending watchdog has rebuked the country’s top financial regulator for being too slow to act on regulatory risks and for failing to give the government the information it needs to judge the success of a controversial overhaul.
The National Audit Office acknowledged that the Financial Conduct Authority, which oversees 50,000 companies across the UK, had made improvements under a three-year-old transformation programme but said weaknesses remained.
“There can be a significant delay between the FCA identifying an issue to tackle, and it taking regulatory action,” the NAO said in its 56-page report on the regulator’s performance as it juggles the aftermath of Brexit, the government’s sprawling Edinburgh reforms and demands in new areas such as crypto.
The NAO acknowledged that the FCA needed new powers in some areas, such as the buy-now-pay-later market, but said that in others “even when an issue falls inside the FCA’s perimeter, or it has the power to act, it can take years for the FCA to implement any enforcement action”.
It cited crypto, an area popularly referred to as the “wild west” of finance for its lack of governance, as an example of the FCA’s slowness to act; the regulator’s first enforcement action did not come until February 2023, three years after new anti-money laundering rules governing the sector came into effect.
The report said the FCA’s capacity to oversee crypto had also been blunted by staff shortages at the regulator, which was hit by industrial action last year as workers opposed parts of the transformation plan. “While turnover for the FCA as a whole has now fallen, delivery risks remain high in some specialist areas,” the NAO said.
The FCA’s efficiency attracted scrutiny from the then-economic secretary Andrew Griffith a year ago, when he wrote to chief executive Nikhil Rathi and the head of the Prudential Regulation Authority stressing that the government wanted “world-leading . . . operational effectiveness” from its watchdogs.
The FCA has repeatedly defended its transformation plan and maintains that the increased data it has begun to publish is proof. However, the NAO said the regulator’s “public reporting is complex and makes it difficult for stakeholders, including HMT [HM Treasury], to judge its performance”.
The report further criticised the FCA for “setting out the direction it expects metrics to move” under a 2022 plan, but not disclosing “what levels of performance it expects to achieve either overall or for individual metrics” and for operating an internal reporting system that includes 49 indicators across 168 activities all linked to “priority commitments”.
“The FCA must complete its work on optimising its use of data, assessing whether it is achieving the outcomes it intends and whether it is able to direct resources to where they can have most impact,” said Gareth Davies, NAO comptroller and auditor general.
He added that the watchdog “must also be clear about which of the long list of activities it is monitoring internally are its priorities. If the FCA can do this, it will be well placed to meet the challenges of the changing environment in which it operates”.
The NAO’s recommendations for the FCA include an autumn 2024 deadline for it to develop a plan for better external data on its performance and to ensure its “operational processes” are fit for it to achieve its many goals by December that year.
The NAO also suggested a September 2024 deadline for “building on the FCA’s current work to develop its strategic workforce planning, develop and maintain a long-term plan for workforce needs”.
The FCA said it was “committed to achieving the helpful recommendations” of the NAO.
Source link
