The City minister said she warned the Financial Conduct Authority (FCA) “several times” that its controversial ‘name and shame’ rules could harm companies before the regulator moved to water down the plans.
Following intense criticism from firms and ministers, the regulator confirmed on Thursday that it would soften plans to publicly name companies facing investigation on a more regular basis and at an earlier stage.
Speaking at a Politico event in London, Tulip Siddiq said she had raised industry concerns with the FCA “several times” that the plans could negatively impact firms’ reputations or valuations and hurt Britain’s attractiveness as a financial centre.
“From the sounds of it, they have watered down some of the proposals,” she said. “I guess it’s now wait and see – let’s see how it goes from here.”
Companies are now set to be given a ten day notice period that they are facing investigation – rather than the one day previously proposed – and an extra 48 hours’ notice should the FCA decide to announce an investigation.
The potential negative impact on a firm would also be “explicitly considered” as part of a public interest test, the FCA said.
Siddiq said she understood from conversations with the regulator that “the number of firms per year is actually very low, who get caught in this enforcement”.
Still, she sharply criticised the FCA’s early communications around the proposals, which it first announced in February.
“It didn’t land well with industry, and I think the messaging around it was dreadful,” Siddiq said. “We want to give people the confidence to invest in our country if we want to deliver this central mission of growth, and these proposals didn’t fill people with confidence.”
She added: “The messaging was really wrong in the way it was done. We don’t want people to operate in our financial services sector and be worried all the time.”
Some City groups have argued that the new measures do not go far enough. Miles Celic, chief executive of lobby group TheCityUK, said that while it was “good to see movement on some of the issues the industry has raised”, there was “little change in other key areas”.
The new Labour government has made tearing down post-financial crisis red tape a key pillar of its agenda for the City, arguing some of the FCA’s rules have gone too far in holding back growth.
“Things have settled down, there seems to be some sort of stability in the country,” Siddiq added. “This is a time to reset the relationship we have in the City and to take some risk. We feel that risk appetite is just too kind of low in our country.”
She added that the Treasury would try to encourage “taking small risks which are responsible” without its approach to regulation becoming “a race to the bottom”.