Pity the Treasury: It has to find a new chair for the City watchdog in the midst of Brexit

John Griffith-Jones will step down next year but he should have gone earlier 

James Moore
Chief Business Commentator
Monday 19 June 2017 17:11
The FCA is in need of a new chairman
The FCA is in need of a new chairman

Has John Griffith-Jones just created a nasty headache for the Treasury as it battles to salvage something out of Brexit for Britain’s businesses and economy?

It certainly looks that way. Mr Griffith-Jones has announced that he will step down as chairman of the Financial Conduct Authority when his five year term comes to an end next year.

Trying to find a replacement to oversee the country's top financial watchdog would be a challenge at the best of times. Trying to do it in the middle of the Brexit process? Well, you do the math.

Nonetheless, Mr Griffith-Jones’ departure is probably the best for everyone, even if it might not seem that way to the Treasury’s frazzled mandarins.

Prior to joining the financial watchdog, he had a long career at KPMG, which took him right to the top of the big four accountancy firm.

You may remember that KPMG was auditor of HBOS that signed it off as a going concern a matter of months before the bank had to be rescued by Lloyds.

As if that wasn’t bad enough, it has subsequently emerged that a £245m fraud was for years perpetrated at the bank’s Reading branch by former senior manager Lynden Scourfield and some of his associates. They started lengthy jail sentences earlier this year after being convicted at trial.

As if that wasn’t bad enough, KPMG was also the auditor of the Co-operative Bank, another financial institution at which some truly awful financial problems emerged.

Those events naturally cast a cloud over the accountant and led to questions being raised about its work. As a result, the Financial Reporting Council, which regulates auditors, launched investigations into the audits of both banks (but only after an awful lot of political pressure in the case of HBOS).

It should be said at this point that there has never been any suggestion that Mr Griffith-Jones bears any personal responsibility for any mistakes, if indeed the FRC finds that there were any made on the part of the firm he used to run. Given the speed at which the FRC works, we'll probably be waiting until the next century to find that out.

Mr Griffith-Jones has nonetheless repeatedly faced calls for his resignation, and no wonder. Was he really the right man to be chairman of one regulator with another looking so closely at the work of the business he used to run? The question is all the more relevant given the distrust and cynicism the public feels towards Britain’s financial institutions, their regulators, and their bosses.

I would suggest he was not. I would further suggest that it is right that he is stepping down and that the next person to serve as FCA chairman needs to be free of any such distractions.

Finding such a person will be challenging for the Treasury. It will just have to rise to meet it.

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