UK Chancellor Jeremy Hunt has publicly expressed his concerns regarding the Financial Conduct Authority’s (FCA) new proposal to reveal the names of companies under investigation earlier in the process.
This plan has sparked a debate about its potential effects on the presumption of innocence and the international competitiveness of the UK’s financial sector.
The FCA’s intention behind this “naming and shaming” policy is to increase transparency in its regulatory activities.
However, this has been met with strong opposition from both the government and influential figures within the financial industry.
“I think it’s completely reasonable to name and shame a failing water company,” Hunt remarked in an interview with the Financial Times.
“But I think in a financial services context, it’s different.”
Amidst growing concerns, Chancellor Hunt has urged the FCA to reassess the proposal, highlighting that it seems at odds with the agency’s newly established secondary growth duty.
This duty aims to foster growth within the financial sector and aligns with similar objectives set by the Prudential Regulation Authority.
Echoing Hunt’s sentiments, Silvija Krupena, Director of the Financial Intelligence Unit at RedCompass Labs, and other industry leaders have criticized the FCA’s approach. Krupena noted the problematic nature of the FCA potentially becoming an ineffectual watchdog, suggesting instead that the regulator needs more powers and resources to effectively carry out its duties.
“It would significantly and pointlessly damage a firm’s reputation and value,” said Miles Celic, Chief Executive of TheCityUK, to the Financial Times.
He highlighted the adverse consequences of such a policy, especially given the lengthy duration of FCA investigations which often conclude without requiring any action.
In response to these critiques, the FCA has reiterated its commitment to its core objectives, which include protecting consumers and ensuring market integrity, while also considering its role in promoting international competitiveness and growth.
The FCA stated, “As we have said throughout the process, this is a consultation.”
They plan to take into account all feedback before making a final decision.
Industry groups like the Managed Funds Association have urged the FCA to abandon the proposal altogether, arguing that it could undermine the effective operation of markets and damage the UK’s reputation as a global financial hub, potentially driving firms away.
The ongoing debate underscores the delicate balance the FCA must maintain between transparency and the potential negative impacts of its regulatory policies on the financial sector’s global standing and growth.
The outcome of this consultation will significantly influence the UK’s financial regulatory environment in the post-Brexit landscape.