FCA defends dropped banking inquiry

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The FCA has launched a robust defence over its shelved inquiry into pay and culture at banks as claims emerge the Bank of England influenced the decision to scrap the review.

Last month, it emerged the regulator had scrapped an inquiry into banking culture and had chosen to deal with firms individually instead. FCA chairman John Griffith Jones and acting chief executive Tracey McDermott have been summoned before the Treasury committee to justify the decision.

Responding to a freedom of information request, published this week, the FCA said its 2015/16 business plan set out plans for a thematic review on “whether culture change programmes in retail and wholesale banks were driving the right behaviour”. The report was to focus on pay and promotion, and how well banks report to whistleblowers.

The regulator says after it completed the initial phase of work, it said it became clear that a report highlighting good and bad practice “would not be the best way to support and drive culture change across the sector”.

It adds it became aware the independent Banking Standards Board had begun a similar piece of work which it did not want to duplicate.

The FCA says it advised the Pratitioner and Consumer Panels it was reviewing its strategy between October and November, as well as the Banking Standard Board and the banks involved.

The Prudential Regulation Authority was informed the project would be stopped in December, as was an undisclosed MP.

Separately, the Financial Times has reported that PRA director Megan Butler was a key figure in overseeing the decision to drop the report.

Butler is understood to have been on secondment from the PRA, part of the Bank of England, and joined the FCA in September.

An FCA spokeswoman says: “As Tracey McDermott has previously said the FCA decision to not continue with the thematic review on culture was taken by her.  To suggest there has been any PRA/BoE influence on this decision is simply untrue”.