Osborne slated after shelving review into finance culture
Watchdog was due to report on banking industry
THE dropping of a City watchdog review into British banking culture will open George Osborne to the charge that it is “payback” for the funding the Tories got to win the last General Election, John McDonnell, the Shadow Chancellor, has suggested.
The Chancellor was accused of “bowing” to demands to drop the so-called “banker-bashing” probe by the Financial Conduct Authority, which was set up after the scandals involving Libor rate-rigging and the mis-selling of Payment Protection Insurance.
The FCA had begun a major review into whether or not pay, promotion and other incentives had contributed to misconduct witnessed in previous years and which contributed to the financial crash of 2008.
But the watchdog announced it was dropping the idea and would instead “engage individually with firms to encourage their delivery of cultural change”.
The decision comes after Martin Wheatley, the former FCA chief, seen as too pro-consumer by some in the City of London, announced in July his decision to quit the post; it was seen as an ousting since Mr Osborne refused to renew his contract.
MPs accused the Chancellor of being behind the decision to drop the review just months after it was setup.
“George Osborne is behind it without any question,” declared Labour’s John Mann, who sits on the Commons Treasury committee. “This decision leaves us hugely exposed in the future because it allows the banks to continue to act as they acted before.”
He claimed that the Chancellor was “bowing to pressure” from the banks, some of which, like HSBC and Barclays, had threatened to leave the UK.
HSBC has said it is investigating whether or not to close its UK HQ in the City, where it has been based for more than two decades.
Fellow committee member Conservative MP Mark Garnier expressed disappointment at the FCA’s announcement.
“There has always been this great argument that perhaps the Treasury is having more influence over the regulator than perhaps it ought to and, certainly, if I was looking for a Machiavellian plot behind what’s happened here and the tone of the regulator, then I suppose I would start looking at the Treasury.”
Mr McDonnell said the decision was “shocking but not surprising given the pattern of behaviour since the removal of Martin Wheatley...and the new legislation that George Osborne is pushing through the Banking Bill to soften the regulation of banks as well.
“What I’m fearful of is this individual approach that will be behind closed doors and we are reverting to regulation by conversations in the gentlemen’s clubs again and that’s exactly the reason we got ourselves into an economic crisis as a result of the risk-taking and... corrupt practices that took place by some elements in the City.”
Noting how Mr Garnier had pointed the finger at Mr Osborne’s intervention on the dropping of the FCA review, the Shadow Chancellor said: “That lays him open to [the claim] – some will allege – this is payback for the funding the Conservative Party got to win the last election.”
‘‘ This decision leaves us hugely exposed because it allows the banks to continue to act as they acted before