Andrew Bailey, deputy governor of the Bank of England (BoE), will become chief executive of the UK Financial Conduct Authority (FCA) which has been fraught by political turmoil in recent months.
Former CEO, Martin Wheatley who fined banks a record £1.47bn ($2.3bn) in 2014 over foreign exchange and Libor rigging, had been ousted by George Osborne last year, raising concerns over the UK regulator’s independence.
In July 2015, the Financial Times referred to Wheatley as "tormentor-in-chief for the industry" following the penalties imposed on the post-2007 banking scandals and the outcome of other regulatory affairs.
Of the same article, a former regulator said the 2015 May election in the UK left Wheatley "on the wrong side of the argument" as he "has nailed his colours too resolutely to consumer protection".
Yet Bailey, who is well established in the City, presently heads the BoE’s Prudential Regulation Authority (PRA), the central bank’s banking supervisory arm. He has been given a five-year term at the FCA, but his salary has not been disclosed yet.
Bailey could be considered a surprise appointment to the UK regulator, as his name did not surface in the months running up to today’s announcement.
But earlier this month, acting leader at the FCA Tracy McDermott turned down the top job full time. McDermott will however remain as interim CEO until Bailey resumes his new role, of which time a successor at the PRA will be found.
The FCA has been under more intense scrutiny since, under McDermott’s leadership, a review into City banking culture was ditched late in 2015.
Yet MPs of the Treasury Select Committee earlier this month grilled the FCA’s chairman John Griffith-Jones and McDermott over the decision.
According to Reuters, asked whether the FCA had been leaned on by the UK government to scrap the banking culture review or if the regulator’s independence is being compromised, Griffith-Jones replied: "The simple answer to both is no."
Before joining the FCA, Griffith-Jones was CEO, chairman and senior partner of KPMG UK, during the time the firm was auditing HBOS, which put his appointment at the financial regulator under scrutiny due to claims of a potential conflict of interest.
The Financial Reporting Council’s (FRC) Conduct Committee announced on 21 January that its Executive Counsel would undertake preliminary enquiries after reviewing the PRA and FCA report on the failure of HBOS.
In November, the accounting regulator didn’t find "reasonable grounds" to investigate KPMG in relation to its HBOS audit work.
Commenting on the appointment of Andrew Bailey, Chancellor of the Exchequer George Osborne said:
"We have cast the net far and wide for this crucial appointment and, having led the Bank of England’s response to the financial crisis, Andrew is simply the most respected, most experienced and most qualified person in the world to do the job."
ICAEW CEO Michael Izza described Bailey as the right man for the job. He added:
"The challenge in front of him should not be underestimated. The FCA does not just need to be a strong regulator, it also needs the support of the industry if it is to continue make the changes needed to restore trust in financial services."
Chronicle of a resignation foretold: FCA chief quits