Andrew Bailey is VERY VERY ANGRY. The London Capital and Finance collapse wasn’t his fault so don’t blame him!
Bailey acknowledged that a key problem had been a failure to act on phone calls to the FCA’s call centre raising concerns about LCF. But he said this was an operational flaw he inherited [in 2016] when taking up the CEO role. “The contact centre in my time was receiving 200,000 calls a year and there was no system for extracting information from those 200,000 calls . . . the red flags were buried in those 200,000 calls.”
His pathetic excuse is contradicted by the Gloster report
The Investigation considers that the failure to act [on LCF] sooner is, at least in part, because of a failure by ExCo to ensure that: (i) new and emerging risks, such as those identified in the SIWS RiskCo Summary Paper of 26 July 2017,were sufficiently cascaded to those front line employees in Supervision and Authorisations who were engaging with firms on a daily basis; and (ii) those same employees were encouraged to escalate new and emerging product types that they encountered when conducting supervision/authorisations work. Such steps would have improved the FCA’s ability to scan the horizon for new risks, albeit that, in the case of LCF, the unusual nature of its mini-bond offering, its financial promotions breaches and the concerns raised by third parties should have been more than sufficient for the risks to be on the FCA’s radar in any event.
My emphasis. Call centre volume was nothing to do with it. The problem is regulatory failure to act on anything that is in the too difficult box.
I remember a similar problem, and similar solution, from the old days of the FSA in the early 2000s. It was called ‘the Wash’ or something stupid like that, the idea that emerging problems would come out in the wash. There was also the ‘Banana Skin’ report to enable working level staff to spot ‘new and emerging’ risks, blah blah.
Clearly those solutions didn’t work, or they would have worked in the case of LCF.