Outgoing Financial Conduct Authority (FCA) chairman John Griffith-Jones has set out four key challenges for his successor Charles Randell when his five-year term in office commences on 1 April.
In a speech to TheCityUK on Wednesday (14 March) Griffith-Jones, who will step down on 31 March after a first term marred by criticism, identified Brexit, technological advances, the relationship between the legal and regulatory process and the relationship between the FCA and those it regulates as the biggest issues facing Randell.
Former Slaughter and May lawyer Randell, who advised ministers on the 2008 financial crisis, was confirmed as the next FCA chairman in January and is scheduled to serve a five-year term.
Randell currently sits on the Bank of England's Prudential Regulation Committee, but his five-year term as a director is set to expire this month.
Commenting on his time in the role, Griffith-Jones said: "From my perspective, it has been both a great privilege and an unmissable experience to have played a modest part in moulding the FCA into a fundamental building block of the country's single most important industry.
"I wish everyone involved all the very best, especially Charles as my successor."
Griffith-Jones said Randell faces the challenge of retaining the UK's position as a "financial centre of choice" after Brexit, "ensuring that London can remain a wholesale banking, asset management and insurance marketplace for all nationalities, safeguarded by a system of sound regulation and established law at least equivalent to the best of the rest".
He added the FCA "will play its full part in making the very best of the hand that gets dealt".
However, Griffith-Jones warned the "noise of politics bumping up against economics makes the long-term outcome uncertain".
He said after Brexit the FCA will "need to be there regulating, whatever the outcome", but that it should not engage in any kind of "regulatory race to lower standards".
Griffith-Jones said advances in technology "provide an additional rich source of new issues, use and abuse of data, personalised differential pricing and the power of network effects in promoting dominant players".
He referenced the ongoing debate both in the UK and globally about how best to regulate cryptocurrencies, which "have all the potential of causing consumer harm unless brought within the regulatory perimeter".
The outgoing chairman said: "on the one hand the official sector does not wish to afford [to cryptocurrencies] the status of a currency, but which are being advertised to the consumer as alluring investments on billboards in Canary Wharf."
Relationship between the legal and regulatory process
Griffith-Jones said Randell will also have to assess and contend with the "relationship between the legal and regulatory process".
He said the FCA has to contend with "a significant mismatch between the external view of the powers that we have and should therefore use, and the legal constraints that we, internally, feel we constantly need to have regard to", such as "European law, exposure to judicial review, appeal to the Upper Tribunal and beyond".
According to Griffith-Jones, Randell faces "the inaccessibility to the law by the consumer, on the triple grounds of speed, complexity and cost", as 'justice delayed is justice denied' "has more than an element of truth to it in money matters".
He explained: "A four-year legal process and a dense thicket of jurisprudential argument provide a far less attractive route to redress than the use of 24/7 media and the associated parliamentary support to pressurise the regulator to short circuit due process in contentious cases.
"I am further struck by the ready availability of civil justice in the UK to the globally wealthy, while out of financial reach to most British citizens."
Relationship between the regulator and the regulated
Griffith-Jones said the final thing on Randell's "to-do list" was to examine the relationship between the regulator and those it regulates.
In defence of his own record, Griffith-Jones said it is "not possible in as short a period as five years to be sure that the FCA has established itself sufficiently robustly to resist pressure to move position should it arise, as it certainly will one day".
He added: "Our best defensive bulwark is of course our own excellence, but it will be greatly helped by a financial services sector that has regained the trust and support of the country at large.
"While considerable progress has been made since the dark days of 2008, there is, by general consensus, still a long way to go.
"The FCA, will continue to put the conduct agenda high on your list of priorities, but the real agent of change, culture, remains largely under the control of the firms themselves.
"Or put more succinctly, in the short term you get the regulator you have, in the long term you will get the regulator you deserve."
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