Nobody fears the Financial Conduct Authority. Nobody fears its genial boss, Andrew Bailey. Not really. Or at least not enough to worry about doing jail time or even being banned from working in the City if they do something wrong.
The FCA might be the main regulator of the financial services industry on behalf of Britain’s vast army of consumers. It might have a wide range of powers to bring financial services companies to heal when they rip off individuals. Yet it appears to be a creature of the establishment, overly keen to join the Treasury and the Bank of England in protecting the industry when questions arise about the bad behaviour of companies flogging financial products.
Bailey is ex-Bank of England and the relatively new FCA chair, Charles Randell, spent the bulk of his career in the City as a lawyer, latterly helping piece together the battered banks he now regulates.
So it’s no wonder Bailey used his time before MPs on the Treasury select committee to explain why it was that his organisation couldn’t do much about one claim of wrongdoing after another.
A case in point was the well-documented efforts of staff at Royal Bank of Scotland to suck dry many of the small businesses caught up in its Global Restructuring Group. Their activities lay outside the FCA’s remit. It didn’t regulate small business customers. And anyway, there wasn’t any evidence of outright fraud, even though many victims argued there was enough systemic wrongdoing to sanction the bank’s top brass, which included Nathan Bostock, who oversaw GRG and now runs Santander UK.
The Labour MP Rushanara Ali asked if Bailey was too nice to bankers. He disagreed and then interestingly Randell leapt to his defence, warning the committee the FCA was coming under even greater strain.
With 60,000 firms, 3,200 funds and 150,000 approved persons to regulate, the job is immense, he said.
Bailey added that the dramatic changes of the way we all save, especially for retirement, played a part. No longer are we looked after by our employers and the insurance industry, which in a previous era took on the risks of falling investment returns and increasing life expectancy.
In the switch to self-invested personal pensions (Sipps) and other forms of direct investment, which place the onus on savers to understand the market and the risks they are taking, scandals are likely to proliferate.
He probably had in mind the case of the fund manager Neil Woodford, who manages more than $3bn (£2.3bn) in an Equity Income fund that is now frozen due to the sheer weight of investors seeking to move their money elsewhere.
MPs had already expressed concern at the way institutional investors quit the fund, leaving the smaller investors trapped.
Bailey looked forlorn when he said Woodford had broken the spirit and not the letter of the FCA’s rules in the way he moved shares around to avoid a regulatory clampdown. If only the regulator could police the City’s ethics armed with a set of principles rather than a code. Then he might catch out wrongdoers.
Bailey, though, doesn’t display any urgency or passion for punishing wrongdoers. Woodford and the financial advice industry have extracted tens of millions of pounds in fees while knowing the fund was suffering. If Bailey is disgusted by the way the industry behaves, he should say so, and say so loudly.
Big pharma, big pay packet
Big is beautiful in the US healthcare industry and it’s not just about bigger budgets to find new drugs. It also makes for monster pay packets.
The latest takeover involves Chicago-based AbbVie, which is led by Richard Gonzalez. The chairman and chief executive, who earns a bonus directly from sales of the firm’s bestselling drug, will run the new business once AbbVie has swallowed Allergan, the Irish-based maker of Botox.
At the moment Gonzalez makes $20.8m (£16.3m) a year. That figure is likely to rise after the $63bn deal goes through. Not least because Brenton Saunders, the boss of Allergan, will also join the new board, bringing his $32.8m a year remuneration package with him.
Earlier this year Giovanni Caforio struck a deal as the boss of Bristol-Myers Squibb, the US drugmaker, to buy rival Celgene for $90bn. Ahead of the deal Caforio was paid $19.4m a year. And the list goes on.
Gonzalez was grilled in Congress recently about his bonus scheme and whether it provided an incentive to keep drug prices high. The answer was obvious and only goes to support the claim that health businesses in the US are run as cash machines for executives.
