City watchdog chiefs to face MPs over dropped banking inquiry

Top brass at City watchdog the Financial Conduct Authority are being summoned before a committee of MPs to explain why an inquiry into banking culture has been dropped.

The chairman of the influential House of Commons Treasury Committee, Andrew Tyrie, said recent decisions by the FCA were giving the impression of a "weakening of resolve".

Shadow chancellor John McDonnell said he was "deeply worried" that the FCA had been influenced by Chancellor George Osborne to take a softer approach to the banks and was now "almost rudderless".

The FCA was created in 2013 to replace the Financial Services Authority in the wake of the financial crash, with a remit to regulate conduct related to the marketing of financial products.

It has been without a permanent chief executive since Martin Wheatley - widely seen as tough on the banks - left last summer after learning that Mr Osborne would not renew his contract.

As well as dropping the inquiry into banking culture, the FCA has recently decided to take no action against HSBC over allegations of Swiss tax avoidance and has shelved a report into incentive structures for financial product sales staff.

Mr Tyrie told BBC Radio 4's Today programme: "Each in itself isn't necessarily crucial, but cumulatively they do give the appearance of a weakening of resolve. Certainly the FCA's decision to drop its review into banking culture looks odd. After all, it was in their business plan."

Acting FCA chief executive Tracey McDermott and chairman John Griffith-Jones will be called before the committee so MPs can "make sure that they are getting on with implementing the new challenges they have been given by Parliament", said Mr Tyrie.

"They have got a tough job and we want to make sure that they are doing it properly on behalf of millions of taxpayers and consumers.

"I'm concerned that, as we move further and further away from the crash and those awful events, time dims the memory, and therefore it is absolutely essential that we keep in mind all the time that we are trying to get this right.

"It's our job to put in place the best protection we can to make sure that when the next financial crash does come - and we can be sure eventually there will be one - that we are as prepared as we possibly can be for it."

Mr McDonnell told Today: "We now have a body that is almost rudderless. In addition to that, what we have seen is them dropping their inquiry into the culture of banking.

"I believe that is influenced by George Osborne. I have called on him to intervene to try to get that back on track and that hasn't happened.

"Not only do we have a vacuum, but that vacuum is being filled by a politician, as far as I can see, and we are going backwards rather than forwards.

"We are reverting to type and my worry is that is undermining the whole lessons that we learnt as a result of the economic crisis. I am deeply worried about the whole situation."