Situation vacant again at the City watchdog

Outlook

(ANDREW WINNING/Reuters/Corbis)

Six months after elbowing out Martin Wheatley as boss, the Financial Conduct Authority is back to square one in the hunt for his successor.

Tracey McDermott, the acting chief executive and former head of enforcement, had established herself as the leading candidate to replace him, only to decide that the job was not for her as the recruitment process was drawing to a close.

I’ve met Ms McDermott. She is tough and competent, and has seen through some of the FCA’s biggest disciplinary cases, handling the Libor and foreign exchange rigging scandals. She would have made a credible and effective chief executive. Sadly for the credibility of Britain’s system of financial regulation, that’s not to be.

The FCA insists the decision was a personal one, and that it had nothing to do with the Treasury’s cuddling up to the City and its banks.

It also insists, and fiercely, that the same is true of her decision to drop a review on the banks’ culture, which had been identified as a priority in this year’s business plan.

That assertion will be tested by the Treasury Select Committee, which has announced plans to hold a hearing on the issue, and a good thing too because it is hard not to feel cynical.

George Osborne elbowed Mr Wheatley aside because he was seen as being too tough on the banking industry. With HSBC in the midst of reviewing whether to walk away from London, the Treasury then altered his banking levy, recasting it to make it more palatable to Britain’s biggest listed banking group and to the City’s other big guns.

The mood music has very obviously changed. It is against this backdrop that the Treasury’s headhunters have to go back to a very short shortlist of people who could do the £700,000 job turned down by Ms McDermott. Whether any of them might want it – it looks like they may find themselves walking a political tightrope – is an open question. Ms McDermott has given the Chancellor a headache but he only has himself to blame.