The head of Britain’s financial watchdog is stepping down early in a move some industry watchers said was a sign the government wants to take a less confrontational stance towards banks.
Sources familiar with the matter said Martin Wheatley, viewed as a hardliner in regulatory terms, had resigned as head of the Financial Conduct Authority (FCA) after the government refused to extend his contract, due to end in March 2016.
In a statement on Friday, finance minister George Osborne praised Wheatley for his work in launching the FCA in 2013 but said different leadership was required to take the watchdog to the next stage of its development, without elaborating.
Barney Reynolds, a financial services lawyer at Shearman & Sterling, said the decision showed a change in tone from ministers.
“They want a slightly more business-friendly approach to take root and to rein back from some of the more hostile approaches immediately post credit crunch,” he said.
“This is very much welcome as the UK financial sector was starting to lose traction.”
Having governed in coalition from 2010-15, Britain’s pro-business Conservative Party won an outright majority in May elections. Osborne has since begun to sound more conciliatory towards banks, talking of a new settlement with an industry that is vital for UK economic growth and tax revenues.
After hefty taxes on banks and a raft of new regulations, financial services giant HSBC is reviewing whether to keep its head office in London.
Wheatley, 56, warned banks in 2012 he would “shoot first and ask questions later,” a statement he later said he regretted.
He had to forgo his bonus for the 2013-14 financial year after the FCA was criticized for mishandling the announcement of a review into life insurance policies.
The FCA has come under pressure from lawmakers to protect consumers better after they suffered from three decades of mis-selling scandals ranging from pensions to loan insurance.
John Mann, an opposition Labour member of parliament’s influential Treasury Select Committee which has grilled Wheatley on his work, said Osborne was wrong to “sack” a regulator as it undermines the watchdog’s independence.
“The government is launching a worldwide search; Martin’s replacement will, like him, need to be passionate about protecting consumers, promoting competition and completing the job of cleaning up the City, so it is the best-regulated market in the world,” Osborne said in his statement, referring to London’s finance district.
Osborne, who said last week he wanted regulators to focus on keeping London as an attractive global financial center, said Tracey McDermott, the FCA’s head of wholesale market supervision, would take on the role of acting chief executive.
McDermott has been viewed internally at the FCA as a leading contender for the top job.
Britain’s regulators were tarnished by the 2007-09 financial crisis when undercapitalised banks had to be rescued by taxpayers. The then Financial Services Authority was split into two, with the FCA having a remit to oversee markets and conduct, and the Bank of England supervising the solvency of banks.
“I am incredibly proud of all we have achieved together in building the FCA over the last four years” Wheatley said in a statement.
Wheatley is a former deputy chief executive of the London Stock Exchange who left to head Hong Kong’s financial regulator before returning to Britain to lead the FCA.
Under his watch, helped by McDermott’s stint as head of enforcement before she moved to supervision, the regulator has levied record fines on banks after they were caught trying to rig the LIBOR interest rate benchmark and currency markets.
He has said repeatedly that the job of improving standards at all levels of banks is far from finished but dismissed industry accusations he was only interested in “heads on sticks.”
Anthony Browne, chief executive of the British Bankers’ Association said Wheatley had been “firm, fair and sensible.”
(Additional reporting by David Milliken; editing by Keith Weir and Mark Potter)
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