Andrew Bailey deserves scrutiny – not an inquisition from Gina Miller

 Andrew Bailey, who is set to take over as the Governor of the Bank of England 17 March, is coming under increasing scrutiny over his time as the head of the Financial Conduct Authority. A petition has been launched by Gina Miller, famous for her litigation concerning Brexit, to have the appointment withdrawn.

According to Bailey’s critics, which include not just Miller but a crossbench selection of MPs, his tenure at the FCA was marked by scandal and lax enforcement that should disqualify him from the role. These charges were enough for former chancellor Philip Hammond to pass over him when looking for a successor to the current BoE governor, it was reported.

Bailey’s supporters, including former Governor of the BoE Mervyn King and the former Chancellor Sajid Javid, who recommended the appointment, see him as a “safe pair of hands”. A long-term BoE insider, though he has not served on the vital Monetary Policy Committee, Bailey has a reputation for dealing with crises. After the occupation of Iraq, he helped create and produce the country’s new currency. His reputation grew further during the financial crisis of 2008. As bankruptcies loomed, Bailey helped arrange the bailouts that stymied the worst of the crash, apparently arranging Northern Rock’s while also on the phone to his wife advising her how to deal with a bear that had broken into their American home.

It was this reputation for crisis management, and his tenure as head of the BoE’s Prudential Regulation Committee, that earned him the poisoned chalice of the FCA post. He was appointed by the then Chancellor, George Osborne, in 2016.

Osborne had established the FCA in 2013 and appointed its hard charging first director, Mark Wheatley. It proceeded to levy record fines in the wake of banking scandals like the LIBOR rigging conspiracy. However, the department also struggled, understaffed as workloads rose, under fire from politicians for being too soft and from banks for being too aggressive. It was also allegedly undermined by its patron Osborne, who appeared to question its function and block some of its proposals. By the time Wheatley left in 2016 the FCA was undergoing a public morale crisis.

With the FCA in crisis and in the public eye, any boss of it was bound to come in for criticism and Bailey has been no exception. During his tenure he faced calls to resign from MPs who felt he was insufficiently aggressive in pursuing malfeasance.

In comes Alan Miller, the stockpicker turned founder and head of the True & Fair Campaign. His report into Bailey’s conduct at the FCA provided the foundations upon which his wife, Gina Miller, has based her petition. Alan Miller has accused Bailey of turning the FCA into “the industry’s lapdog”. He claims the FCA’s fines under Bailey’s tenure fell by 78% compared to the previous four years.

It seems likely that part of the explanation here is that there has been no scandal on the scale of LIBOR under Bailey’s tenure to drive up the fine totals. It is also true that Bailey is reluctant to levy large fines. He has publicly questioned their use before, arguing they inflict losses on stockholders who have already lost out due to fraud, and do not serve as much of a deterrent. Instead, his mantra is “personal responsibility” embodied in his championing of the Senior Managers Regime which aims to make it easier to hold senior management accountable for wrongdoing that happens on their watch.

While Bailey’s arguments are gaining traction among some senior finance figures, believers in big fines will likely see this as a craven attitude.

Bailey could also be accused of not always properly following through on his own principles. Take the case of the whistleblower, Sally Masterton, who was pushed out of Lloyds over her report criticising its handling of a scandal at HBOS which it had acquired in 2009. Bailey intervened in 2018 to push Lloyds to compensate her for her treatment. He did not take any action against the bank’s senior management – instead, he opted to wait for a report about the fraud due this year.

For the man affectionately nicknamed the “sexy tortoise” due to his considered style this may seem a reasonable timescale. But for those who yearn for more aggressive action, Bailey is seen as too soft.

It is also undeniable that the scandals that took place at London Capital & Finance, Lendy, and Woodford Investment Management while Bailey headed the FCA are troubling. In each case there is evidence that the FCA missed red flags and could have acted sooner, with some accusing Bailey and his colleagues of having been “asleep at the wheel”.

True, Bailey’s subsequent willingness to meet with protestors outside his office following the collapse of LCF, and even attend a candlelit vigil for the investors who committed suicide in its aftermath, was laudable. Bailey can hardly be held entirely personally responsible for the organisation failing to spot these scandals as they brewed.

It does seem reasonable to judge him by the same stringent standards he advocates for senior managers in the financial sector – and by his own standards he deserves to face tough questions. A grilling by MPs, including his critics like the Conservative’s Kevin Hollinrake, is in order. But there is a danger of overkill with this petition from Gina Miller.