The report follows a hearing with Mr Griffith-Jones held on 6 November 2012.
Mr Griffith-Jones’ appointment forms part of a welcome and much needed fundamental shake up of regulation.
The Committee recognises Mr Griffith-Jones has a difficult task ahead of him.
The FCA is a key part of the new regulatory structure, with responsibility for conduct and, in certain areas, prudential regulation.
It is taking over from a body, the FSA, which failed consumers badly. If the FCA simply picks up where the FCA left off, consumers will suffer again.
Regulation is primarily about judgement. Mr Griffith-Jones and his board will need to ensure that the FCA follows the Prudential Regulation Authority’s (PRA) lead, and adopts a radically different approach to the widely discredited box-ticking practices undertaken by the FSA.
He must also develop a markedly better culture within the FCA than that of the legacy FSA. Setting up a more effective board will help to achieve this.
The Treasury Committee has expressed deep misgivings about the conflicting priorities inherent in the FCA’s hierarchical objectives. Not least among its problems is that they may lead to inadequate attention being paid to the competition objective. Mr Griffith-Jones will need to think very hard about the inter-relationship between these objectives and how they can be meaningfully fulfilled.
The Banking Commission recently heard evidence from Claire Spottiswoode that: ‘I do not see much sign that it [the FCA] is going to employ those [competition] powers at all... I do not see many signs that the FCA is taking this seriously, which I regret very deeply.’
Taking it seriously is the necessary first step. As John Fingleton told the Commission, getting competition into the culture of the FCA will also be a huge challenge for its leadership.
The Government’s new Financial Services Act fell short of providing the new regulators with the accountability structures that were needed.
The Government has undertaken that further amendments to the Act can be made in the Banking Reform Bill. Although in better shape, the Act remains somewhat deficient and the Parliamentary Commission on Banking Standards will make further recommendations for improvement.
Mr Griffith-Jones has undertaken to respond to requests from the Committee for the FCA to conduct internal reviews of its own policies and performance, and to requests from the Committee for information. That’s a step forward but both should have been duties set out in the Act.
His actions will need to speak as loudly as his words.
The Treasury Committee’s oversight of the FCA will be more rigorous and demanding than in the past. It needs to be, especially given the deficiencies of the Financial Services Act.