The Financial Conduct Authority’s (FCA) chief executive Andrew Baily has said that Brexit will place “considerable demands” on his organization over the next year. According to him, the complex challenge of successfully extricating the UK’s financial services industry from the European Union will place a strain on the FCA’s resources for the third year in succession.
This was the stark message he conveyed when presenting the FCA’s business plan for the coming 12 months. Brexit, he declared, was an issue that would “no doubt continue to place considerable demands on us and on firms.” The challenge, according to him, is to balance the FCA’s work on Brexit with helping shape global regulation through the work it does with other nations’ regulators and international organizations.
Yet in FCA board meeting minutes released just days earlier, the FCA was talking of putting extra investment into supervisory work this new financial year — with more than half of that investment coming from delaying £6M of Brexit implementation costs until 2020-21. Which begs the question, if Brexit is putting such major demands on the FCA why is it looking to divert resources away from it?
According to Andrew Bailey, the immediate priority for his organization over the next 12 months is to ensure an orderly transition period once the UK leaves the EU; with October 31 being the date currently set for the proposed departure.
He has made it clear that the next few years are likely to be challenging. And this time last year, the FCA was already saying that the pressures of dealing with Brexit meant that it was having to reduce some of what it classed as its non-essential operations. We were told then that this was forcing the FCA to make challenging and difficult decisions about its priority activities.
And yet despite all the talk of demands, challenges and Brexit being the immediate priority, the proposal is there to shift resources earmarked for dealing with Brexit elsewhere. It may be understandable that the FCA feels the need to up its game regarding supervision, given the fact that an independent investigation is to examine its supervision of the collapse of London Capital and Finance. But if Brexit is the major concern that the FCA’s chief executive says it is, surely this moving of monies is nothing more than robbing Peter to pay Paul.
The FCA has let it be known that it has drawn up detailed plans for a variety of possible Brexit outcomes; one of which is a strategy for managing a no-deal Brexit. It was stating as recently as last month that the UK’s financial sector remained at risk of potential disruption in the event of a rushed exit from the EU. And now the chief executive has made it clear that Brexit is still imposing a heavy burden on it.
But how many organizations would make plans to divert resources from the issue that they have identified as their number one concern? Not many.
In the past year, the FCA has said it has cut back on its non-essential work due to the demands of Brexit — demands its own chief executive has just forecast will place an immense strain on its workings in the next year. And yet it is considering cutting the funds that were earmarked for this work. Even in the twisting and turning world of Brexit this appears an unfathomable stance.
Aziz Rahman, pictured above, is the Senior Partner leading International Regulation and Corporate Crime, Fraud and Business Crime, Complex Crime, Civil Fraud and Corporate Investigations at UK-based law firm, Rahman Ravelli. He can be contacted here