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Pressure builds on Wheatley to fall on his sword

April 2, 2014

George Osborne unleashes fury at FCA over insurance probe leak” screamed a headline in yesterday’s Financial Times. The intervention of the Treasury in the row over the Financial Conduct Authority’s bungled announcement of its review of closed fund insurance policies is an ominous sign.

Osborne: wrong person for FCA to alienate

Osborne: wrong person for FCA to alienate

I wrote yesterday morning (before I got round to the FT) that I thought FCA boss Martin Wheatley could ride out the calls for his resignation over this, especially as part of the reason for sell-off was the very plausible fear of investors that huge numbers of policies might have been miss-sold and billions more in compensation payments would follow. The industry has only itself to blame for such vulnerability.

The intervention of the Chancellor of the Exchequer is such forceful terms is a serious blow to the FCA and Mr Wheatley. Clearly, there is little love in the Treasury for the FCA.

I did wonder last week about the wisdom of the FCA pouring cold water on the Chancellor’s pensions reforms with its warning about potential “consumer detriment”. This seemed to me an unwise comment to make in public about a reform the Chancellor himself had launched and which has proved politically popular. Regulators do not exist in a bubble, although they sometime behave as if they do. Antagonising a Chancellor is rarely a good move.

Wheatley: can he survive?

Wheatley: can he survive?

Before all those insurers, advisers and others all too quick to moan about the regulator start to get too excited they should pause to consider the consequences if Mr Wheatley – and other senior members of his team – depart suddenly. Another hiatus, another upheaval, another change in regulatory direction. We’ve seen far too many of these before and they rarely benefit the regulated or their customers. They almost always result in higher costs. In short, beware of what you wish for just in case you get it.

Yesterday I thought Mr Wheatley might ride out the storm. Now, I think he has a less than 50/50 chance of surviving. He needs to savvy up on the political front very quickly if he is to survive.

2 Comments
  1. Wheatley is taking on such a powerful lobby – whose interests, we have seen in all but marketing materials, do not extend beyond their own…but for how much longer can the prevailing culture survive when its own excess is its greatest weakness!?

    Whining about the cost of more/different legislation, whilst passing on the costs to the customer and funding the parasitic (self-anointed) experts in risk, is the norm. This appears the only means by which those that profit handsomely from the status quo can contend with uncertainty, by forestalling it for as long as they can…because they CANNOT ‘manage’ it any better than they can predict or manage risk using correlations in data.

    They fear and will continue to fight change because it THREATens what is familiar (know/risk) whereas, for the enlightened few, THE OPPORTUNITY (for competitive advantage through differentiation) lies in offering genuine choice. An iterative process of graduating from data to INFORMATION. From correlation to causality.

    The game is up for FS profiting from volatility, privatising profits and socialising losses.

    Carney and the appointment of Andy Haldane at BoE along with Wheatley (assuming he survives the dark political forces) offer its customers/citizens AND the Financial sector the best opportunity it has had for what it needs most and can least afford: transformation – transparency – trust.

    Denying UNCERTAINTY or treating it as if it were risk are not the actions of financial leaders worthy of the ‘title’. Building RESILIENCE for an industry whose security is inextricably linked to the success of its many customers can only be done with and through them [such is the fractal nature of our economies, complex financial networks, systems, sub-systems, processes….]

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  2. My belief is that Wheatley has been doing a good job but that he seems to have been remiss in watching his back and naive in the political arena. If he survives the FCA must sharpen up its engagement with the Treasury and Parliament.

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