MPs say top City watchdogs are 'slow and obstructive'

Two top City regulators were lambasted by MPs on Tuesday for failing to respond to requests for information, with the warning that parliamentarians were "fed up" with their attitude.

Andrew Tyrie, chairman of the Treasury select committee, warned the two bosses of the Financial Conduct Authority that there was deep disquiet with their approach.

"I'd like to say this is likely to be the last soft ball hearing on this. We're fed up. There is deep disquiet about the slow and apparently obstructive approach we've had on a number of issues," Tyrie told John Griffith-Jones, chairman of the FCA.

Griffith-Jones, who said he was very keen to resolve their differences, was giving evidence alongside Martin Wheatley, chief executive of the FCA.

John Thurso, a Liberal Democrat MP on the committee, cited three main issues of contention: information requested about how the regulator had reached agreement with banks over payouts for mis-selling interest rate swaps; receiving internal audits from the regulator; and legal advice on whether a specific type of interest rate swap was regulated.

Griffith-Jones said there were issues of confidentiality involved in providing some of the information demanded. Wheatley was also asked whether the regulator was confident it had solved the way banks were fixing the prices of financial instruments in the wake of the Libor fixing scandal, which erupted in 2012 when Barclays was fined £290m for its role in manipulation of the benchmark rate. He said: "We have not solved it yet. It's still a work in progress."

The fair markets review set up by the chancellor, George Osborne, was looking at what areas might need to be covered by regulation, Wheatley said. He added that the investigation into foreign exchange manipulation was continuing and that all the banks were embarrassed by the continued scandals sweeping the industry.

He defended the level of fines being imposed by the regulators, which he said were "not at a level that represents systemic risk to any of the institutions" and were also discussed with the Bank of England's Prudential Regulation Authority.

Top investor Neil Woodford said this month that he was selling all his shares in Britain's largest bank HSBC because of "fine inflation" which was making investing in the bank too risky.

The chairman of HSBC, Douglas Flint, had warned that the threat of fines from regulators was making banks risk averse as staff became cautious in an attempt to avoid penalties from regulators. Flint described an "observable and growing danger of disproportionate risk aversion". Two years ago the bank was fined £1.2bn by the US for breaching sanctions and allowing Mexican drug lords to launder money through the financial system.

Wheatley was asked about anti-money laundering rules, which have sparked complaints from ordinary customers caught up in the new restrictions. Wheatley said this was "a response to the some of the things going on in the US".

"The cost of getting it wrong are so high banks want to get themselves out of that risk," said Wheatley. "The banks have consistently failed to spot the high risk individuals they should not be banking," he added.

After the hearing Tyrie said: "We need money laundering regulations that work, not just a back-covering exercise. Millions of people are already put to trouble as a result of these regulations."

The regulators were also asked about "dark pools" through which professionals trade shares while avoiding stock exchanges. Wheatley said the 12 dark pools operating in the UK would be monitored.

Barclays is fighting penalties from a US regulator over the way it operated its dark pool. The New York attorney general has accused the bank of fraud for the way the dark pool was marketed to clients.

Dark pools are highlighted in the book Flash Boys by best selling author Michael Lewis, which claims that high-frequency traders have rigged the stock market by taking advantage of systems not available to others. Barclays has argued that the accusations by the US regulator contain factual errors.

Powered by article was written by Jill Treanor, for The Guardian on Tuesday 9th September 2014 20.21 Europe/London © Guardian News and Media Limited 2010


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