The Chancellor ratcheted up the pressure on the UK's financial watchdog yesterday as he declared himself "profoundly concerned" over the damaging leaks that wiped billions off the value of insurance companies.
A pre-briefing to a newspaper in which Clive Adamson, the Financial Conduct Authority's director of supervision, threatened a review of 30 million pensions and policies sold since the 1970s hammered the sector last Friday – before the FCA intervened again in the afternoon to clarify its intentions.
It has launched an independent inquiry but George Osborne turned up the temperature yesterday in a letter to the regulator's chairman, John Griffith-Jones.
In the letter, the Chancellor describes Friday's events as "damaging both to the FCA as an institution and to the UK's reputation for regulatory stability and competence".
The FCA's chief executive, Martin Wheatley, yesterday insisted he would stay in his job despite the fiasco, which was labelled an "extraordinary blunder" by the Treasury Select Committee's chairman, Andrew Tyrie. Asked if he had considered his position, Mr Wheatley replied: "No, I haven't. I think I have got a big job to do."
But the Chancellor wrote: "These events go to the heart of the FCA's responsibility for the good order and integrity of UK financial markets … I expect you and the FCA board to do everything possible to make good that damage."
Mr Osborne said the starting point of the FCA's review should be that it "holds itself to at least as high standards as it would expect of a listed company handling highly market-sensitive information, and should hold its own staff to the same standards it would expect of any approved person" – dropping a heavy hint over disciplinary action for Mr Adamson and Mr Wheatley.
The Chancellor wants to know who authorised the briefing to a single journalist, whether it was an "isolated exception" and why the FCA took so long to react and clarify its position, waiting till late on Friday after the shares had plunged.
He also questions to what extent a false or disorderly market in the shares was present before the FCA clarified its position, and he calls on the inquiry to look at broader lessons for the FCA's public relations strategy and "where senior accountability should lie".
The Association of British Insurers has also written to the Chancellor to express its concern. "The events of last week were very serious and we believe the investigation into the regulator needs to be completely independent; the regulator cannot investigate itself. Our letter is not calling for heads to roll, but for lessons to be learnt to ensure that this issue does not happen again," a spokesman said.