Lords call in FCA chief Nikhil Rathi over plan to 'name and shame' firms it is investigating
The City watchdog’s boss Nikhil Rathi is under increasing pressure over plans to ‘name and shame’ firms it is investigating – as peers demanded answers amid an intensifying row.
Rathi has been summoned to appear before a parliamentary committee as it launched an inquiry into the proposals.
His response so far to questions ‘isn’t acceptable’, the Lords financial services regulation committee said. The Financial Conduct Authority (FCA) chief executive looks increasingly isolated after upsetting City trade bodies and Chancellor Jeremy Hunt.
At stake are plans for the regulator to drop its policy of only naming firms it is investigating in exceptional circumstances. Instead, it would decide whether to do so is in the public interest.
A consultation ended this week. The financial sector says it will damage competitiveness.
Pressure: Financial Conduct Authority chief exec Nikhil Rathi (pictured) looks increasingly isolated after upsetting City trade bodies and Chancellor Jeremy Hunt
Lord Forsyth of Drumlean, chair of the Lords committee, wrote to Rathi last month expressing concerns about the ‘disproportionate effect’ on firms that are named but turn out to be blameless.
But the FCA said it had been urged to be more open about probes such as those it carried out into the likes of Woodford Investment Management and Greensill Capital.
Officials have said the aim is not ‘seeking to shame’ firms but to shine ‘a spotlight on a case in a way that will deter others’.
But Forsyth wrote to Rathi to express the committee’s disappointment. It has now launched an inquiry and said it will invite the FCA boss to appear before it.
The committee said it was ‘unhappy’ that Rathi did not respond to a request to pause changes until after it had taken further evidence.
Forsyth said: ‘The FCA response failed to directly address our concerns. This isn’t acceptable.’
The FCA said: ‘We have received the letter and will respond.’ The latest developments come after 16 trade bodies expressed their opposition in a letter to the Chancellor.
Hunt said: ‘I hope the FCA re-look at their decision.’
He told the Financial Times the plan ‘doesn’t feel consistent’ with the FCA duty, made law last year, to support the UK’s international competitiveness, alongside its main objective of protecting consumers.
The furore leaves Rathi looking more isolated and comes as, on a separate matter, he is at odds with the Bank of England, after telling the FT he was ‘not convinced’ private equity firms pose a ‘systemic’ risk – a contrast with the Bank’s warnings about the sector.
But Rathi won the backing of Lord Tyrie, the former Tory MP who, as chair of the Treasury select committee, grilled bankers on the financial crisis.
He told The Times: ‘If a large number of consumers look as if they’re being ripped off… disclosure is likely to be in the public interest.’