- Andrew Bailey appointed CEO of the Financial Conduct Authority
- Bailey will move from role as Bank of England Deputy Governor
It was a mild July morning when Martin Wheatley gathered his senior aides to the seventh floor boardroom of the U.K. Financial Conduct Authority’s offices in London’s Canary Wharf. An important announcement was coming, he told them, and he wanted them to hear it first.
Reading from a draft press release, Wheatley told the roughly 45 directors he was resigning after two years as chief executive officer. Halfway through, the man known to many of his colleagues as standoffish, almost cold, was in tears, said a person there. Chancellor of the Exchequer George Osborne had decided "different leadership" was required, the Treasury would later say.
Osborne confirmed the new direction Tuesday with the appointment of Bank of England Deputy Governor Andrew Bailey to be Wheatley’s successor as the official in charge of enforcing stringent post-crisis rules for the financial industry. It’s a new role for the career central banker, who has spent the last three years of his 30-year stint there running the Prudential Regulation Authority.
Osborne appealed to Bailey to apply for the job, said a person with knowledge of the situation. The banker’s views have appeared to dovetail with Osborne’s. Last year the chancellor declared an end to an era of “ever-larger” fines against banks for misconduct.
In 2014, Bailey told a London conference that regulators should consider whether higher fines are beneficial to meeting public-policy objectives. “Increasing fines does obviously create headwinds to rebuilding the capital strength of the banking systems,” he said.
If Osborne needed to convince Bailey to take the job, he could at least offer a hefty salary boost. Bailey was paid about 346,000 pounds ($496,000) last year at the Bank of England compared with Wheatley’s 701,000 pounds, according to annual agency reports.
The FCA’s independence has been front and center in recent weeks after the regulator dropped a review into banking culture. At a hearing with U.K. lawmakers last week, FCA Chairman John Griffith-Jones denied any interference from the Treasury in the regulator’s decisions.
"If the Treasury wants the FCA to start afresh it seems a strange decision to look only two miles down the road for the next CEO," said Michael Ruck, a lawyer at Pinsent Masons in London and a former FCA employee. "Choosing someone from the Bank of England also increases the links between the FCA and Treasury, which won’t do much for the perception of FCA independence."
FCA officials heartily endorsed Bailey, saying he has a proven track record working with the agency.
“Having been an FCA Board member since 2013 he has been fully engaged with all the regulatory issues that we have faced in recent years and in setting our strategy,” FCA Chairman John Griffith-Jones said in a statement.
At the PRA, Bailey has handled policy, focused on the U.K.’s financial plumbing, regulation of banks’ capital requirements and bonus clawbacks. The PRA has only issued four fines over conduct, a job that largely falls to the FCA.
His lack of enforcement experience has raised questions from some financial-services lawyers about the direction of the FCA under his leadership.
"Bailey is a quintessential member of the financial establishment," said Ben Rose, a lawyer at Hickman & Rose in London. "His banking philosophy, revealed in a number of speeches in recent years, displays a deep preoccupation with risk and capital markets; enforcement is not a tool with which he seems very familiar."
How much will change in the near-term is unclear. Bailey won’t join before the FCA publishes its 2016-17 business plan in March and won’t contribute to it beyond his existing duties as an FCA board member, according to an FCA spokeswoman.
"This appointment shows that the Treasury and George Osborne have decided to downgrade consumer interests," said Labour lawmaker John Mann in a blog post on Tuesday. "We need a strong, independent regulator, not another lackey for George Osborne and the banks.”