Andrew Bailey looks to reboot UK conduct regulator’s ‘mission’

New chief executive seeks to clarify approach after stumbles in past years, admitting global understanding of conduct regulation still at an early stage

Andrew Bailey: tightening the remit of the FCA under a new mission statement

Four months into the job, the UK's chief conduct regulator has sought to clarify the organisation's "mission", after a series of mistakes dogged the early years of the Financial Conduct Authority (FCA).

Andrew Bailey, who became FCA chief executive in July, said the watchdog has limited resources and so has to be clear on its priorities. He also noted the global study of the "principles and theory" of conduct regulation is at an early stage, leaving authorities to figure out their own approach.

"It is quite interesting that the field is rather more open, and I think that gets reflected into policy and into practice," he told journalists today (October 26).

The mission document, published today, covers when the FCA will act and when it will not, its approach to investigation and enforcement, an attempt to define when "harm" is being caused, and more innovative aspects of the authority's strategy, such as using behavioural "nudges" and big data techniques to improve outcomes.

Despite being little more than three years old, the FCA has suffered a number of setbacks, including fallout from a communication blunder in 2014 that moved markets. Then chief executive Martin Wheatley resigned in July 2015 after hearing his contract would not be renewed.

A report into the affair found morale in the organisation shaken by the intense scrutiny and criticism that followed, and stabilising the ship is now one of Bailey's major challenges. He told the UK parliament's Treasury Select Committee in July he would focus on running the organisation "effectively and tightly", and said clarifying the mission would be one of his first priorities.

Andrew Tyrie, who chairs the committee, welcomed the mission statement today. "At a quick read it looks like a robust attempt to give the FCA a much clearer sense of direction," the MP says in an emailed statement. "It also attempts to identify what the FCA cannot reasonably be expected to do."

At the press conference today, Bailey was quizzed on whether the mission statement would prove a useful "political shield", as it sets out both areas the FCA is focused on, and those it will pay less attention to for want of resources.

"There is an element of truth in that," said Bailey, though he added: "I'm not sure I would use the word 'political shield'."

He clarified: "I think you are right that because we have to make choices, it is important we are transparent about the choices we have made." He acknowledged there could be a situation where something goes wrong in a part of the financial system that was not a key area of focus, in which case it is important to explain "here is how we reached our judgement".

A press release alongside the mission statement referred to the FCA's "finite resources" and the organisation's "large and complex" remit, but Bailey said the document was not a play for more funding.

"This is not a sort of Trojan horse," he said, but rather "it's about explaining how we go about doing our job with the resources we have". The FCA frequently "rejigs" its staff allocation to cope with new challenges, he added.

An example is the FCA's Project Innovate, said Christopher Woolard, the FCA's director of strategy and competition. The scheme offers support to innovative financial start-ups, and is now run by around 20 people at the FCA, who were assigned to the task "without increasing headcount", Woolard said. "But we have de-prioritised other things to do it."

This article originally appeared on Risk.net's sister website, CentralBanking.com.