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Lawmakers ask BoE’s Bailey to clarify ‘apparent contradictions’ over LCF

Mar 9, 2021

By David Milliken

LONDON (Reuters) – Bank of England Governor Andrew Bailey must clarify “apparent contradictions” in evidence he gave to a parliamentary enquiry about his role in the 2019 collapse of investment group London Capital & Finance (LCF), lawmakers said on Tuesday.

Bailey gave evidence to parliament’s Treasury Committee on Feb. 8 about his former role as head of the Financial Conduct Authority (FCA), which had received heavy criticism in a report by former judge Elizabeth Gloster.

More than 11,000 investors lost up to 237 million pounds ($329 million) from the collapse, and the government is planning to pay compensation in certain cases.

Some of LCF’s activities were regulated by the FCA, but the regulator did not see itself as responsible for monitoring LCF’s promotion of so-called “mini-bonds” to individual investors.

Gloster said long-term problems with the FCA that pre-dated Bailey’s tenure as chief executive were no excuse for it having failed to do more to warn investors about LCF.

Gloster subsequently disagreed with Bailey’s account to parliament of a dispute between them over whether regulators should be held personally responsible or culpable in her report, as well as a range of other issues.

The committee asked Bailey to “clarify the apparent contradictions between the evidence you gave and Dame Elizabeth’s account”, and set a March 22 deadline for a reply.


Issues under dispute include the volume of complaints that the FCA had to handle and the use of the term “broken machine” to describe the FCA, which Bailey said had first been used by Gloster, but Gloster said was first used by Bailey.

The Bank of England declined to comment on the committee’s request.

The FCA was set up in 2013 to take over some functions of the former Financial Services Authority, which politicians scrapped after blaming it for regulating banks inadequately before the 2008/09 financial crisis.

Bailey, a long-serving BoE official who took the FCA’s helm in July 2016, told lawmakers last month that the regulator was overwhelmed by the volume of complaints it received from the public, which reached as many as 200,000 a year.

Bailey said he implemented processes to sort through complaints more effectively, but that the changes did not come fast enough to spot the problems with LCF’s behaviour until late 2018, when it was too late to stop investors’ losses.

Official reports in Britain typically allow people who are criticised to see them before publication and point out potentially defamatory inaccuracies.

Gloster said Bailey tried to use this process to avoid being criticised by name in her report.

Bailey disputed this and told parliament that the allegation made him “quite angry”.

($1 = 0.7196 pounds)

(Additional reporting by Andy Bruce; Editing by William Schomberg and Alex Richardson)