Report demands cultural change at FCA and PRA

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A report has accused the two leading British financial regulators of a lack of transparency and “group-think.”

The study by Cass Business School and the New City Agenda think tank argues that cultural issues at the FCA and Prudential Regulation Authority must be addressed by politicians and that “unless we change the culture of regulators we will be sleep walking into the next financial crisis.”

The report says: “There is a clear and present danger that we will repeat the mistakes of history. Much needed change is already being watered down. The attention of politicians has moved on.”

“Regulators need to redouble their efforts to change their culture and move away from the bureaucratic and ineffective approaches of the past.”

The report also hits out at an apparent six-fold increase in regulators’ administrative costs since 2000, which now stand at £1.2bn a year.

The authors argue that a culture of “box-ticking” imposes additional costs on smaller firms.

The report says: “A deep seated culture of box-ticking had developed in the UK’s financial regulators. Instead of concentrating on the big issues, regulators spent valuable time adding ever more detailed rules and procedures and giving consumers ever more complicated information. This is likely to increase confusion and cost rather than establish clarity.”

“Complexity and box-ticking benefit lawyers and gives a veneer of reassurance, but it increases costs and makes regulations more difficult to understand and enforce and easier to manipulate or avoid. It also distorts competition. Big firms have armies of officials and a close relationship with the regulators to help navigate this complexity. Smaller firms and new entrants often find themselves reeling from the complexity, with only a call centre at the regulator to help them out.”