The UK government is by all accounts raging about the FCA plans to name and shame firms being probed by the regulator in advance of any finding of guilt.

Indeed, UK PM Rishi Sunak, is said by government colleagues to be ‘fuming’.

On past form, in determining who is right and who is wrong, it usually saves time to assume that the UK PM is on the wrong side of any argument. That is a view rather borne out by opinion polls and the local election results announced on 3 May.

The FCA argues that its proposals will deter bad actors and reassure consumers.

Views received by this desk, wisely, do not quote the PM or the UK Finance Minister in advancing their arguments.

Industry reaction

Silvija Krupena, Director of Financial Intelligence Unit at RedCompass Labs, tells us: “By naming and shaming without having the power and resources to follow up with investigation and enforcement actions at scale, there is a real danger the FCA becomes a watchdog which is seen as being all bark and no bite.

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“The FCA is caught between a rock and a hard place. It’s tasked with protecting people and changing the state of compliance for the better but without damaging the UK’s international competitiveness. With every policy change, there are winners and losers. Naming and shaming will see law firms and consultants celebrate incoming gigs, while banks are up in arms due to the endless potential for reputational damage.

“Naming and shaming shouldn’t be the FCA’s next move. Instead, the focus should be on giving the regulator teeth by providing more powers and resources to do its job better. For example, it could carry out annual bank exams rather than relying on S166 reports to increase accountability, undertake more and deeper investigations and invest more in building strong, detailed guidance.”

Regulator proposals may be counterproductive

Meantime, Henry Balani, Global Head of Industry & Regulatory AffairsEncompass Corporation, adds“It’s is no surprise that there have been concerns raised about the regulator’s plans to publicly name firms under investigation. Such a move has the potential to significantly impact reputation, regardless of the outcome of investigations, with it being found that there are widespread impacts on banks linked to probes, including on areas such as business valuations.

“With a growth focus for the UK’s financial services sector, it is imperative that all parties work together to boost trust and make positive progress. While transparency remains crucial, it is equally important to safeguard the integrity of businesses, and action like this could in fact be deemed counterproductive, when the focus should be on boosting services and the landscape for the better, by developing and leveraging best-of-breed innovation, for example.”

FCA may need more conciliatory tone but needs to assert independence

The FCA enjoys a reputation on a rather different level to the current government. It is independent, or at least that is the theory. Its initial proposals may go a little too far and it will need to give at least the appearance of being conciliatory going forward. But it will have one eye on the likely result of the next general election. It may well be just as keen to canvass the view of the Labour opposition and likely next government here. And it has one trump card. The only UK government in living memory worse than the current one, was the cataclysmic 49-day nightmare of PM Liz Truss. She tried to neuter independent regulators on financial policy and mercifully she failed.

As for the UK government, it should pick fights it might win. Being seen to be the side of the financial sector against an independent regulator is not a debate it will win with the public.