Despite escaping a vote of 'no confidence', MPs supported Conservative MP Guto Bebb, who originally proposed the debate alongside Labour MP and Treasury Select Committee member John Mann.
Bebb argued that the FCA is 'not fit for purpose', citing the regulator's redress scheme for the mis-selling of interest rate swap products, the handling of the Connaught Income Fund, the FCA’s involvement in the report on the failures of HBOS, and the decision not to move ahead with the review of banking culture.
Guto Bebb said:
"Some people have argued that this debate and this motion are premature. Given the evidence and information that I will present, I argue that they are long overdue.
"There are concerns about the way in which the interest rate redress scheme was put together. One of my first questions, which I still have, was about the arbitrary way in which 10,000 businesses were excluded from the scheme for no apparent reason. Because of an arbitrary decision by the FCA, those businesses were excluded from any means of support under the redress scheme.
"Does the regulator have a sweetheart deal with RBS? That is a serious yet reasonable question to ask. Considering the way that the interest rate swap redress scheme has operated, there is a question mark over why RBS is being treated differently?
"Let me move on to the Connaught Income Fund, which creates a real problem concerning regulation in this country. The regulator was informed not of mismanagement but of fraudulent behaviour, yet it took four months before it put a notice on its website to highlight its concerns and say that the fund in question was not as safe as a bank account, and a further year before that fund was wound up. In the meantime, between the whistleblower informing the regulator about the problem with Connaught and the winding up of the scheme, more than half the total investments into the Connaught income stream occurred. It could therefore be argued that the regulator was responsible for at least half the fund."
John Mann continued:
"This is more than a passing problem. The FCA ought to be strengthened, but it would appear that it is being weakened. With its culture reviewed, dissipated and destroyed, it is being neutered."
Conservative MP Craig Tracey said it was 'no coincidence' that the number of brokers registered with the FCA fell by 32% between 2006 and 2014. He added that "the knock-on effect of that is the great danger of limiting the choice of our consumers—the very consumers whom the Financial Services Authority set out to protect—at a time when access to good, independent financial advice is needed more than ever".
MP Gary Streeter described the interest rate swap mis-selling scandal as "one of the greatest scandals in recent decades". He argued that the Government have been "more concerned about the survival of the banking system in its entirety and about getting the nationalised banks ready for re-privatisation as quickly as possible".
He continued:
"I can understand that, but it is perhaps for those reasons that they have not been robust enough with the FCA, whose oversight of this mis-selling has been weak, toothless and anaemic from the very beginning. This has been mis-selling on an industrial scale and we have hardly got to grips with it at all."
However MP Mark Garnier said that while the FCA has "undoubtedly got it completely wrong in many cases... it is also important to consider the successes.
He said:
"The FCA has managed to bring substantial fines for foreign exchange and LIBOR rigging. It even managed to bring a case through the Serious Fraud Office that sadly resulted in no convictions last week, when six foreign exchangers, who allegedly tried to fiddle the fixings, were acquitted. None the less, to get it to court was quite a success. The FCA has taken over responsibility for consumer credit and debt management from the Office of Fair Trading. It has protected consumers by banning retail sales of contingent convertibles—a technical thing to do with the resolution of failing banks."
