British FCA Proposal Sparks Backlash: Early Naming and Shaming Draws Criticism from Politicians, Bankers, and Lawyers: Early Naming and Shaming Draws Criticism from Politicians, Bankers, and Lawyers

British politicians, financiers, and legal practitioners have united in opposition to the Financial Conduct Authority's (FCA) proposal to divulge the names of institutions under investigation at an earlier stage, marking a departure from its previous protocol. The FCA had announced this change earlier in the year, stating its intention to release the identities of banks under scrutiny more promptly, a move contrary to its past practice of revealing such details only in "exceptional circumstances" mid-investigation.

The plan has been met with a wave of criticism from various quarters, with detractors arguing that it could drive business away from the City of London. Kemi Badenoch, serving as both the business secretary and equalities minister, took a firm stance against the FCA's approach, accusing the agency of "regulatory overreach" in a letter addressed to FCA chief executive Nikhil Rathi. Badenoch's concerns extend to the potential adverse effects on growth, productivity, and innovation within the financial sector.

Echoing these sentiments, a senior government figure emphasized the urgent need to curtail decisions that could harm the UK's competitiveness. The FCA's proposal, detailed in a consultation paper released in February, aims to bolster transparency in enforcement efforts and amplify their deterrent effect on the market, underpinned by a broadened "public interest" test. The FCA referenced other UK regulatory bodies such as Ofcom, Ofgem, and the Competition and Markets Authority, which have adopted similar practices.

However, legal experts have raised significant concerns about the potential reputational and financial damage to financial institutions, especially considering that a substantial percentage of FCA inquiries conclude without any ensuing action. Miles Celic, Chief Executive Officer of TheCityUK, articulated strong opposition to the proposal, arguing that it contradicts the fundamental principle of 'innocent until proven guilty' and could erode trust in the industry, thereby compromising the UK's competitiveness.

Frustration with the FCA's stance has reached a crescendo within Whitehall circles, prompting concerted efforts to engage with the Treasury, the FCA, and industry stakeholders to ensure thorough consideration of the potential impacts on competitiveness. While the FCA has faced mounting pressure to enhance transparency surrounding its enforcement practices, particularly following high-profile cases like the British Steel workers' pensions mis-selling scandal, the proposed shift towards earlier naming and shaming has been met with widespread skepticism.

In defense of the strategy, the FCA's enforcement heads characterized it as a "bad cop, bad cop" approach primarily targeting companies due to legal constraints. The regulator emphasized its commitment to expediting investigations and adopting a more focused approach to case selection. The consultation period for the proposal is set to conclude at the end of April, with FCA officials indicating a cautious approach, refraining from announcing investigations deemed likely to have an "outsize impact."

By fLEXI tEAM