The Financial Conduct Authority has “not done enough to tackle the cultural problems that lie behind mis-selling” by financial services firms, a government report has claimed.
A formal review of how the regulator has reacted to mis-selling problems published by the Public Accounts Committee found that the cultures of firms and the nature of their sales incentives have been identified as key factors behind mis-selling.
But the committee said although the FCA has taken some action to deal with these root causes, for instance by promoting changes to firms’ incentive structures and better training of financial advisers, it was still falling short.
The Senior Managers Regime, which the government is introducing for banks from 2016, aims to get senior people to take greater responsibility for the actions of those they manage.
The report said: “But the risks of mis-selling remain, for example pensions freedoms reforms are a potential trigger for future mass mis-selling.
“Middle managers in financial services firms were often promoted on the basis of achieving sales targets, making it hard to embed more customer-focussed approaches.
“The FCA has withdrawn a planned review of banks’ culture, but has not articulated what culture it expects firms to have.
“There is no guarantee that any improvements in cultures will stick as the regulatory spotlight moves away.”
The PAC called on the FCA should outline the actions it will take to improve cultures in financial services firms, and report on their effectiveness in a year’s time.