Payment Systems Regulator top brass did not know the watchdog was being merged into the Financial Conduct Authority until just hours before it became public and relied on media leaks to prepare staff for the sweeping change, the regulator’s interim boss has said.
Speaking at a Treasury Committee hearing less than 24 hours after plans for the sudden merger were announced, David Geale said he had been aware the merger was being mooted, but only had a few hours to tell staff of the change after it was confirmed.
“We were clear it was being discussed,” he told MPs. “We had not been informed of an official decision. We were aware that there was going to be something related to the Payment Systems Regulator (PSR) in the PM’s speech and indeed the Chancellor’s statement last month, but officially we were told yesterday that this would be announced yesterday.”
On Tuesday, Keir Starmer and Rachel Reeves announced their decision to fold the PSR into the FCA, in one of the first major decisions of their push to remove barriers to economic growth posed by regulators.
Reeves said the move would “free businesses from [the] stranglehold” of over-regulation, after a suite of leading payments firms had complained of the overlaps that conforming with three different financial watchdogs entailed. The merger is not expected for several months as the government will need to pass new legislation in order for it to get the green light.
During what was a timely session with politicians, PSR chair Aidene Walsh branded the decision a “pragmatic next step” to streamline regulation despite confirming the board she chaired would eventually cease to exist.
Asked whether she thought the merger would foster growth in the payments sector, she said: “There is a lot of feedback at this moment in time around duplication, around how things could be streamlined… and if some of that can be streamlined then I think that does unlock growth in financial services.”
Geale, who took the helm at the payments watchdog last year and was a given joint-role to head up payments at the FCA in January, revealed that in lieu of official confirmation from government, his leadership team had to rely on media leaks and speculation to prepare for a potential merger.
“We had a leak strategy,” he said. And when pushed by committee chair Meg Hillier on the extent to which his officials were relying on leaks to shape its communication to staff and any potential response, he added: “That happened. There was speculation over the last few weeks… that suggested this might happen. At that stage it was not decided.”
The two officials were also forced to deny speculation that the merger would spark a wave of redundancies at the PSR. Geale said that of the 185 staff currently working for him, almost all would move straight into the FCA, with which they already share an office and IT systems, while some would likely move to the Bank of England.
And when asked if the sudden nature of the announcement was fair on staff and a “professional way of handling the situation”, PRS chair Aidene Walsh said: “Our key concern is our staff. In terms of what moves forward, the work will stay, the what is still there, it’s just how it’s executed [that’s different].