Box-ticking watchdogs accused of allowing UK to sleepwalk into another financial crisis
The UK risks stumbling into another financial crisis, a report out today warns, slamming the watchdogs for being more fixated with ticking boxes than bolstering important regulation.
The report from Cass Business School for New City Agenda noted that, while the Bank of England, Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) had responded to the 2008 financial crisis with a robust set of rules, these had since been "progressively watered down".
In particular, the researchers criticised watchdogs for hiding behind red tape, noting administrative costs for regulators, at over £1.2bn a year, were now six times what they were in 2000. Meanwhile, at £3,641, the FCA handbook now costs the same amount as a second hand Mini Cooper.
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In light of the findings, the researchers are calling on the regulators to make cultural changes within their organisations. While the report noted efforts had been made to address culture, it added that feedback on the PRA's and Bank of England's attempts had been mixed while the FCA risked being "blown off course" in its endeavours.
Andre Spicer, the report's author and professor of organisational behaviour at Cass Business School, told City PM he was worried regulators found "holding banks to account can sometimes be politically dangerous or would lead them to make what some of them call a career-limiting decision".
New City Agenda non-executive director Lord Sharkey commented: "The New City Agenda report serves as a warning against the culture of box-ticking which contributed to the financial crisis, allowed widespread misconduct to occur and let bank executives escape sanction."
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Justin Welby, Archbishop of Canterbury and New City Agenda advisory board member, remarked:
New City Agenda's report into cultural change in the UK's financial regulators is an important piece of work which reminds us that restoring trust requires regulators to practise what they preach. The report sets out clearly the progress made by the FCA, PRA and Bank of England and where improvements are still needed.
An FCA spokesperson noted it would be publishing its "mission" later on in the week, as part of which "we will be seeking engagement with all our stakeholders so that we can set out a clear path ahead for financial conduct regulation in the UK".
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The PRA declined to comment.
Those looking to criticise the watchdogs for going soft on banking have no shortage of ammunition as of late. The FCA came under fire late last year when it shelved its report into banking culture, shortly after former chief executive Martin Wheatley, known for his "shoot first and ask questions later" approach, was ousted from his role.