Should the UK FCA Be Broken Up?

In an opinion piece published in the Financial Times this week, author and former banker Philip Augar argues that the UK Financial Conduct Authority's (FCA) remit is too large for one organization and that it should be broken up.

In recent years, the FCA has faced harsh scrutiny over the regulatory and supervisory outcomes it achieves. A Parliamentary report released late last year accused the regulator of being "incompetent at best, dishonest at worst." And past independent reviews have found that the FCA missed seemingly obvious warning signs ahead of disastrous corporate failures.

Augar is careful to point out that, while much of this criticism may be legitimate, the FCA frequently finds itself in an impossible position. "More usually, the FCA is on a hiding to nothing, excoriated in the minority of cases where things go wrong, never praised when financial services function smoothly and blamed by the industry for impeding business," Augar writes.

The FCA is tasked with four operational objectives: consumer protection, market integrity, competition, and growth. Alongside these, it is responsible for fulfilling 13 cross-cutting commitments. "This is a daunting list risking conflict of interest, confusion and lack of focus," Augar writes. “Against this background, there can be little surprise that the parliamentarians dubbed the FCA's long-running transformation programme a failure. Indeed, such is the complexity and breadth of the regulator's span that any other result would have been a surprise.”

This may simply be too much for one single body to achieve, Augar suggests. If the FCA's remit was limited only to consumer protection, with its other briefs reassigned to more appropriate bodies, it could bring a sharper focus and more specialized skills to fulfilling its mandate, he argues.

"The UK's relatively new government apparently has little appetite for changes to the machinery of government and the FCA is probably safe for now," Augar concludes. "But whether it would survive another serious mis-step is questionable. The case for a conflict-free organisation concentrating on consumer protection would then be compelling."