FCA chief Andrew Bailey kicked upstairs

With the triumphant swagger of a county athlete who sees that he’s the 1-10 favourite for tomorrow’s race, drinks five pints of scrumpy in the pub the night before, and eventually staggers over the line an inch ahead of a 12-year-old farmer’s son before vomiting into the trophy, FCA CEO Andrew Bailey has shrugged off the ongoing scandal of the FCA’s failure to deal with unregulated investments and secured the appointment of Governor of the Bank of England.

Bailey must have been sweating a little as a succession of headlines about financial scandals old and new (minibonds, mortgage prisoners, vulture “restructuring” divisions) – with the FCA’s conscious inaction as a constant theme – rolled through the presses as the Government deliberated its decision. But in the end, Bailey’s “safe pair of hands” reputation won the day.

While no-one is accusing Bailey of being solely responsible for the billion-pound-sum of investors’ money lost in UK unregulated investments – we are in a cycle which started in 2014-15, before his appointment – it was nonetheless Bailey who was in charge as London Capital & Finance used its newly-acquired “CAT standard” of FCA authorisation to grow into a £230m Ponzi scheme, despite many IFAs and members of the public warning the FCA of the dangers.

It was also Andrew Bailey in charge when the FCA shut down Park First, and rather than appointing an independent receiver to act in the interests of investors, allowed Park First eighteen months to oversee the winding up of its own illegal collective scheme. Park First’s handpicked administrators subsequently told investors that their funds could not be returned in full and that £115 million owed to Park First creditors by Park First group companies would have to be written off.

Over in the regulated sector, it was under Andrew Bailey that the FCA allowed Neil Woodford to openly flout the requirement for open-ended funds to hold no more than 10% in unlisted securities, leading to a re-run of Arch Cru.

It is under Andrew Bailey that the FCA has pathetically squeaked about the “regulatory perimeter” instead of using its existing and well-defined powers to enforce the requirement that unregulated investments are only promoted to high net worth and sophisticated investors. And that unregulated schemes which rely on these exemptions can prove that their investors qualify as such.

Andrew Bailey is the architect of the FCA’s policy of masterly inactivity and the predictable and consistent results of this policy are his baby.

Bailey’s main job as Bank of England governor is now, from a retail investor perspective, to justify continuing to hold interest rates at virtually nil; i.e. to allow borrowers to continue spending savers’ money cheaply to avoid scaring the economic horses. I.e. to continue perpetuating the conditions that have driven UK retail investors into the arms of P2P, minibonds, unauthorised collective schemes and every other Tom, Dick and Harry trumpeting “8% secured interest”.

Bailey’s appointment has been repeatedly described as a “safe pair of hands” in the business press. Which for a financial regulator is not so much a backhanded compliment as a two-handed Serena Williams piledriver into your face compliment. Especially in a country riven by financial scandal and “McMafia” money laundering.

But having succeeded first Martin “shoot first and ask questions later” Wheatley at the FCA, and now arch-Remoaner Mark Carney at the BOE, Andrew Bailey has carved out a good niche in taking over from people who took the whole “politically independent” thing a bit too seriously.

A new FCA head will be appointed in the new year.