The FCA is being blamed for falling asleep at the wheel as Nigel Farage's row with Coutts sparked debanking concerns. Photo: JULIAN SIMMONDS
In a scathing exchange about soaring bank profits last Tuesday, the city's senior director of supervisors was confused after a series of rudimentary questions.
Sheldon Mills, head of consumer protection and competition The Financial Conduct Authority (FCA) refused six times to say how much the regulator could fine creditors for inadequate savings rates.
“I can't go into that range. fines,” Mills said in an interview with BBC Radio 4.
His evasiveness was not well received by Chris Mason, the BBC’s political editor, who snapped after the FCA director said he was “understood” about the actions of the regulator . could bear it.
“You weren't clear, you weren't even remotely clear,” Mason objected. “I asked you about how high the fines could be, but you didn’t even have a close figure. This is not clear.”
In recent weeks, the monitoring body has come under increasing pressure on two fronts.
First, because of fears that lenders are cashing in on higher interest rates, and second, because of accusations that he is inactive in connection with debanking problems caused by a row between Nigel Farage and Coutts.
For several months now, the FCA has been announcing its new «consumer fee» — a flagship policy launched last week — that will serve as a key tool to monitor the companies it regulates and ensure they offer fair value to customers.< /p>
On Tuesday, Mills said the policy will play a central role in how the FCA deals with lenders who can't raise savings rates fast enough.
3006 >As the Bank of England began raising interest rates at the end of 2021, lenders have made huge windfalls by increasing their net interest margin, the difference between what they charge borrowers and savers.
Mills said: “Our new consumer tax went into effect yesterday, which requires companies to put consumers at the center of everything they do. And as a practical matter, they are required to conduct a fair value assessment to assess the value they provide to their savings customers. we can take action.”
However, critics say the regulator has been vague in explaining how the new fee will be applied, as evidenced by Mills' failure to answer key questions last week.
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Mason of the BBC quipped: “Our listeners may be puzzled. Listening to this conversation.”
There was also wider criticism of the policy.
A city leader said: “Consumer tariffs are a complete overreach. The FCA is trying to become a price regulator. It should be a regulator of behavior, encouraging competition but leaving consumer choice to the market.”
The FCA spokesman said the company is committed to strengthening consumer protection and supporting competition and choice.
They added: “Parliament has asked us to think about better customer protection. We have been working to improve competition in the savings market, and it has been clear to us that we are not a price regulator.”
Last week, the FCA announced that it would begin naming and shaming those who offer the worst deals after discovering that that the banks gave less than 30 percent of the interest rate hike to depositors.
The move comes after FCA chief executive Nikhil Rati was questioned by a powerful Treasury committee last month about lenders who continue to offer low savings rates.
Although the savings rates offered by the big lenders have improved somewhat, profits continue to rise.
Last week, HSBC reported that its profits more than doubled to £17bn in the first six months. of the year.
Harriette Baldwin, chairman of the Treasury Committee, said she is closely monitoring the high returns of banks.
However, Moody's analysts say the FCA consumer duty will negatively impact lenders' bottom line: «The impact on lenders' profitability will be negative, both as a result of implementation costs and likely impacts on product design and pricing.» /p>
Recently, the regulator was also embroiled in a scandal involving banks closing customer accounts because of their political views.
Last week, a group of prominent Conservative MPs called on Chancellor Jeremy Hunt to investigate the FCA over its failure to resolve the debanking scandal following the Farage scandal with Coutts and questioned its promotion of «environmental, social and governance» measures (ESG). .
The letter stated: «The FCA is actively pursuing an approach that includes forcing a change in culture and diversity of mindsets in banks and other financial companies.»
«It has also played an active role in driving change ESG, where the exact scope, meaning and application of the terms «environmental», «social» and «governance» are at least debatable.
«It appears that the FCA creates and enforces vague rules, including those known as 'principles', which are open to various interpretations.» on the sidelines as NatWest conducts an independent review of the Coutts case and how Dame Alison Rose, its former chief executive, passed sensitive client details to the BBC.
Another senior city official accused the FCA of a denial of responsibility, saying the regulator should have launched an immediate investigation into NatWest to determine if regulatory violations had been committed, rather than waiting for a law firm to look into the situation.
< p>Ahn An FCA spokesperson said: “We have made sure that the NatWest board conducts an independent review of what happened to get a full picture of what happened. It is appropriate that we allow this investigation to take place before we decide on our next steps.
“We have made it clear that firms should not close accounts because of political opinion or free speech. We are reviewing to better understand the scope and nature of payment account closures and will be evaluating banks' responses.”
Rati spent much of his first year at FCA fighting staff for pay. . Now he faces bigger challenges that threaten to cast doubt on the regulator's competence.
If he is to succeed, his performance will need to be much more stable than his colleague's failed performance at the BBC last time. week.
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