Funds News

BoE's Bailey to take more measured approach than predecessor

DUBLIN (Reuters) - Andrew Bailey, the incoming head of Britain’s Financial Conduct Authority, promised on Wednesday to listen carefully to the industry when he starts later this year as the regulatory tone towards banks softens.

Bank of England Deputy Governor for Prudential Regulation Andrew Bailey listens to a reporter's question during a news conference at the Bank of England in London, Britain, December 1, 2015. REUTERS/Suzanne Plunkett

Bailey, a deputy governor at the Bank of England where he heads its Prudential Regulation Authority (PRA) banking supervision department, said it was very important to have a “very open dialogue” with a broad range of representatives.

His predecessor, Martin Wheatley, a hardliner who was ousted by finance minister George Osborne last year, had said he would “shoot first and ask questions later” when it came to banks.

“With due respect to Martin, that’s not my approach. We run a rather more measured approach in the PRA. We are fact based,” Bailey told a financial conference in Dublin.

Osborne has called for a “new settlement” with banks, widely interpreted by the financial sector as a peace gesture after years of banker bashing in Britain following the 2007-09 financial crisis when taxpayers had to bail out several lenders.

Osborne has scrapped a draconian part of new accountability rules for banks and cut levies on bank balance sheets.

Bailey, a 30-year veteran at Britain’s central bank, was persuaded by Osborne to take the FCA top job at the last minute.

British lawmakers are worried that the FCA is vulnerable to political interference, but Bailey signalled a willingness to stand his ground when the watchdog “butts up” against other aspects of politically sensitive policy such as housing.

“How you manage those interfaces? You have to think harder about how the independence works. We have to be transparent and either they agree with us or don’t agree with us,” Bailey said.

He is seen by some commentators as a possible replacement for BoE Governor Mark Carney when the Canadian steps down.

“I don’t live to be the governor of the Bank of England, I live to do the job I do,” Bailey said.

In his speech to the conference, he said fund managers, who he will also supervise as head of the FCA, must give investors clarity on the quality of assets they hold and how these are likely to behave in stressed markets.

Bailey said shrinking bank balance sheets and the corresponding large growth in asset management since the financial crisis only made sense if two conditions were met.

“First, that there is no lack of clarity about the nature of the assets held under management,” Bailey said in his speech.

“The second condition to meet is that there is no illusion about the liquidity of the assets. It is critical that investor expectations are well adjusted to the prevailing liquidity conditions,” he said.

Writing by Huw Jones; editing by David Clarke