UK banking regulator FCA drops major finance industry culture inquiry in favour of misconduct investigation

The Financial Conduct Authority (FCA) has dropped a major inquiry into the behaviour of bankers across the finance industry in favour of dealing with issues related to misconduct with individual banks.

The review into pay, promotion, bonuses and other incentives had previously been heralded as a singularly important inquiry for the city watchdog. However, the decision to scrap is illustrative of a trend across government and beyond to take a softer approach to major banks.

Analysts have highlighted the case of HSBC, which is in the process of reviewing whether it should keep its headquarters in the UK, as one instance in which the government does not want the UK to lose its appeal to global banks.

In a statement the FCA has stressed that despite the move it will continue to hold the cultures and practices within banking to account. "There is currently extensive ongoing work in this area within firms and externally," it said.

"We have decided that the best way to support these efforts is to engage individually with firms to encourage their delivery of cultural change as well as supporting the other initiatives outside the FCA," the city watchdog added.

Politicians have criticised the decision. Mark Garnier, a Conservative MP and member of the Treasury select committee, told the Financial Times he was disappointed the review had ended.

"I hope this is a delay rather than a cancellation because consumers need to know that an independent regulator is happy, overall, with bank standards," he said.

Labour MP John Mann told the newspaper: "As far as we know, the culture hasn't changed yet — that's very clear to people. Cultural problems were fundamental to the financial crisis and remain fundamental now. Lessons haven't been learnt."