The Financial Conduct Authority (FCA) continues to have deficiencies in the way in which it handles crisis management, external communications and market sensitive issues according to the Treasury select committee’s review of the regulator’s internal audits, with MPs vowing to keep a ‘close eye’ on its performance
The committee has examined the FCA’s internal audit reports produced since November 2014, having decided to extend its scrutiny in this area following what Andrew Tyrie, its chair, called ‘the FCA’s extraordinary and incompetent briefing of the press in 2014 on its plans to investigate the insurance industry’.
Tyrie said the FCA has had a difficult couple of years, and analysis of its internal reports shed some light on the extent to which its standards and the quality of its work are improving.
However, he pointed out that a finding of one of these reports is that the FCA ‘lacked a coherent and co-ordinated process for responding to incidents and managing crises’.
The report on crisis management stated: ‘Although it is clear that staff have adopted a best endeavours approach to develop response processes, the lack of overall governance is also reflected in inconsistent approaches to evaluating incidents. It is unclear, for example, what constitutes business as usual incidents and what should be escalated as a crisis.
‘The decision to escalate is left largely to the judgement of individuals and, while this is expected to some extent, there is an absence of broad guidance to support these decisions; the provision of some guidance is common practice in most response frameworks.’
While overall the processes for ensuring market sensitive information was treated appropriately, the internal audit noted: ‘However, our fieldwork has led us to conclude that there is a lack of awareness amongst FCA staff of the risks associated with the handling of market sensitive information.
‘Some FCA staff interviewed were unclear that sending information in the body of emails to firms and other external bodies, excluding the PRA and Bank of England, is not a secure form of communication. They were also unclear whether and how they should indicate to a firm or other body that the information they are sending is market sensitive and should be handled accordingly.’
The Treasury committee will ‘continue to keep a close eye on the FCA’, Tyrie stressing, adding: ‘Deficiencies remain in the FCA’s handling of crisis management, external communications and market-sensitive issues. This has been evident from the FCA’s curious handling of their decision to drop an investigation into bank culture. There is clearly a great deal of work left to do.’
The FCA internal audits are here
