Don’t count on us to prevent another LCF scandal, says FCA boss as he admits watchdog is ‘too risk adverse’
The City watchdog is too risk-averse, its boss admitted yesterday – as he outlined plans to make it more ‘proactive’.
Nikhil Rathi, who took over at the Financial Conduct Authority (FCA) last year, said he wanted the regulator to lock horns with more firms suspected of malpractice, in order to better protect consumers.
But he conceded that the FCA may still be unable to prevent a scandal such as the London Capital & Finance (LCF) disaster which hammered savers in 2019.
Nikhil Rathi, who took over at the Financial Conduct Authority last year, said he wanted to lock horns with more firms suspected of malpractice, in order to better protect consumers
Speaking to MPs on the Treasury committee, Rathi said: ‘There has been, historically, a cultural issue where there is a degree of legal risk aversion. A degree of concern around potentially losing a case and being challenged for doing it.
‘I think we need to be ready to be more proactive, recognising that if we’re taking balanced decisions then some of those may be challenged and in some cases we may lose.
‘If we do that, I hope that when I come to this committee you’ll understand that we are making difficult judgements and dealing with some very well-resourced individuals.’
Rathi and the FCA’s chairman, Charles Randell, had been called in front of the committee to answer questions on its handling of the LCF collapse.
The firm, which had sold ‘minibonds’ to savers offering high rates of return for low risk, tumbled into administration at the start of 2019 amid allegations of fraud.
A report by former judge Dame Elizabeth Gloster found the FCA guilty of a series of failings under the leadership of Andrew Bailey, now governor of the Bank of England.
Rathi – an ex-Treasury official – admitted yesterday the FCA still had a long way to go.
Asked if he could guarantee an event similar to the LCF collapse would not happen again, he said: ‘Not at this stage. But we’re building the systems, we’re developing the capability, but these things take time.’