Why did George Osborne sack FCA CEO Martin Wheatley?

Martin Wheatley

Financial Conduct Authority (FCA) CEO Martin Wheatley was sacked by George Osborne despite, in Osborne’s own words, having “done a brilliant job of launching the FCA in tough circumstances”.

So the question is – was he sacked because he wasn’t being tough enough with Bankers and others in the City or because he was being too tough?

The FCA, now run by interim CEO Tracey McDermott, who was known as a ‘Rottweiler’ in her previous role as director of Supervision, warned that some firms have still not done enough to prevent financial benchmarks, such as Libor, being manipulated.

The City regulator said that the consistency of implementation and speed at which improvements had taken place was “disappointing”.

“The application of the lessons learned from the Libor, Forex and Gold cases to other benchmarks had been uneven across the industry and often lacked the urgency required given the severity of recent failings,” it added.

So there is still a job to do in bringing Banks and traders to heel.

Martin Wheatley is clearly unhappy with George Osborne’s decision to not renew his contract as FCA CEO despite levying billions of pounds in fines and making top-level attempts to reform the culture of trading floors.

“I am disappointed to be moving on and I do so with a sense of unfinished business,” Mr Wheatley said in his first public comments since his sacking.

He made clear that the culture of investment banking remained largely unreformed despite several years of scandals. “The top of organisations have understood the environment . . . but I still think it is quite hard to deliver. It’s tough and it takes time,” he said.

“As we saw with FX [the foreign exchange-rigging scandal], there are some parts, the wholesale parts of financial services, where it is actually not yet seen as relevant. There’s still a view that: ‘Well, that’s a caveat emptor market’ and big financial players trading with one another. That’s the area that has much further to go.”

Mr Wheatley left little doubt that if he had remained in charge of the FCA the banking industry would have faced no respite in his tough approach to regulation. He had considered banning some firms from trading as an alternative to fines, he said. “The use of trading bans, or, in our terms, ‘variations of permission’, is something we actively look at each time we feel that we’ve got to take an action. Those variations of permission can be removing somebody from part of the market, or a significant part of the market, for a period of time,” he said.

A study by the regulator said that six unnamed banks remained ignorant of the fact that their trading data could be used to influence key financial benchmarks, while one had still not put in place any kind of oversight of its submissions process.

The findings come even though global regulators have made the reform of benchmarks a priority over the past three years, highlighting what the FCA said was a cultural resistance in the industry to making painful changes.

It will be interesting to see who is appointed to take Wheatley’s place as it will answer the question of whether Osborne is going to get tougher with the Banks or if he is going to appoint someone who will ease off the pressure and cut them some slack.

Last year Bank of England governor Mark Carney said that top (Bank) executives had “got away without sanction”.

“Maybe they were not at the best tables in society after that, but they’re still at the best golf courses. That has to change,” he said.

To many, especially those who have suffered financially since the recession, which is most of us, Bankers are still getting away with it and the FCA should carry on the work that Martin Wheatley started – to others, and that might include Osborne, our current financial recovery is almost entirely reliant on the financial sector and we should not be killing the Golden Goose by continuing to bash them with billion pound fines.

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