The head of the city’s watchdog, Nikhil Rathi, is under increasing pressure over plans to “name and shame” companies he is investigating, as peers demand answers amid intensifying row. .
Rathi has been summoned to appear before a parliamentary committee that launched an investigation into the proposals.
Its response so far to questions is “not acceptable”, the Lords’ financial services regulation committee said. The chief executive of the Financial Conduct Authority (FCA) appears increasingly isolated after upsetting City business bodies and Chancellor Jeremy Hunt.
At stake are plans for the regulator to abandon its policy of only naming companies it is investigating in exceptional circumstances. Instead, it would decide whether doing so is in the public interest.
A consultation ended this week. The financial sector says it will harm competitiveness.
Pressure: Financial Conduct Authority chief executive Nikhil Rathi (pictured) appears increasingly isolated after upsetting City trade bodies and Chancellor Jeremy Hunt.
Lord Forsyth of Drumlean, chairman of the Lords committee, wrote to Rathi last month expressing concern about the “disproportionate effect” on companies that are named but turn out to be innocent.
But the FCA said it had been urged to be more open about investigations such as those it carried out against firms including Woodford Investment Management and Greensill Capital.
Officials have said the goal is not to “try to embarrass” the companies but to highlight “one case in a way that deters others.”
But Forsyth wrote to Rathi to express the committee’s disappointment. He has now launched an investigation and has said that he will invite the head of the FCA to appear before it.
The committee said it was “unhappy” that Rathi did not respond to a request to pause the changes until after more evidence had been gathered.
Forsyth said: ‘The FCA’s response did not directly address our concerns. This is not acceptable.’
The FCA said: “We have received the letter and will respond.” The latest developments come after 16 trade bodies expressed their opposition in a letter to the Chancellor.
Hunt said: “I hope the FCA reconsiders its decision.”
He told the Financial Times that the plan “does not appear consistent” with the FCA’s duty, signed into law last year, to support the UK’s international competitiveness, along with its primary objective of protecting consumers.
The furore leaves Rathi looking more isolated and comes as, in a separate matter, he is at odds with the Bank of England, after telling the Financial Times he was “not convinced” that private equity firms represented a “systemic” risk, in contrast to the bank’s warnings about the sector.
But Rathi won the backing of Lord Tyrie, the former Conservative MP who, as chairman of the Treasury select committee, grilled bankers about the financial crisis.
He told the Times: “If a large number of consumers appear to be being defrauded… disclosure is probably in the public interest.”