LONDON Britain's Financial Conduct Authority, the body meant to police standards at banks, looks like a "road accident" after a botched decision to scrap a review into banking culture, a senior MP said on Wednesday.
News of the watchdog's decision leaked out last month, raising concerns among members of parliament that the FCA was being leaned on by a government wanting softer treatment of British lenders.
In testy exchanges lasting nearly three hours, members of parliament's Treasury Select Committee accused the FCA's two top officials of a "chaotic" approach to communications which followed hot after another debacle in 2014.
"We all recognise that you have a very difficult job," Andrew Tyrie, the committee's Conservative chairman said. "But ... we do seem to be looking at something of a road accident."
The rebuke came at a vulnerable time for the fledgling organisation, launched in 2013 to reinforce supervision in Britain after the financial crisis. The FCA has no permanent CEO and Wednesday's exchange threw a harsh spotlight on its chairman.
Lawmakers said they had heard concern from the public and labour unions that the FCA was failing to hold banks to account, after years of scandals about mis-sold products and rigged markets, and lasting outrage at past bailouts.
Disquiet over the ditching of the culture review comes after the FCA was heavily criticised in 2014 for briefing a journalist about a market-moving review into the insurance sector.
Tyrie said the "succession of uncertainties" about the way the watchdog has handled communications "suggests there is something wrong with the culture of the FCA itself," in his harshest criticism of a public body to date.
FCA Chairman John Griffith-Jones said the watchdog was trying to do the right thing. "I don't think there's something rotten at the core of England at the FCA," he told lawmakers.
Asked if the FCA had come under pressure from the government to scrap the review or whether the watchdog's independence was being compromised, Griffith-Jones replied, "The simple answer to both is no."
He backed the decision by the FCA's acting chief executive, Tracey McDermott, saying it allowed for a better alternative of examining culture on a bank-by-bank basis.
"This was our way of doing things... I think it was handled entirely appropriately," he said.
Tyrie said Griffith-Jones was "pretty disingenuous" in downplaying the market sensitivity of the decision to drop the sector-wide review.
"NOT EXACTLY DELIGHTED"
Uproar over the culture review comes after British finance minister George Osborne ousted Martin Wheatley as FCA chief executive last year, a decision which Griffith-Jones said surprised him as Wheatley was doing a good job.
Griffith-Jones said Osborne's decision not to renew Wheatley's contract had hurt morale at the FCA.
"I hope that this committee will get behind us," he said. "We need a bit of support and confidence in us to actually do our job."
Osborne is expected to name the new CEO soon, and his lack of concern for the sensitivities of the FCA's acting chief became clear after he announced on live radio earlier this month that McDermott had withdrawn her application for the top job.
McDermott -- who previous imposed multi-million pound fines on banks for rigging the LIBOR inter-bank lending rate -- told lawmakers on Wednesday she was "not exactly delighted" with how Osborne announced her decision without warning her in advance.
"It rather threw the day's plans," she said, adding she "didn't know" if she would return to her previous role at the watchdog once a permanent CEO is named.
She added that ditching the review into banking culture did not signal a shift in the watchdog's approach to supervising banks.
"There was nothing secret about it... There was no question of abandoning culture as a top priority," she said. "In terms of culture in banks, I would say there has been progress over the past few years, we are not there yet."
(Editing by Andrew Heavens)