A bitter row has broken out between the Bank of England governor and the author of an independent report into the collapse of investment company London Capital & Finance (LCF).
Andrew Bailey and former judge Dame Elizabeth Gloster are engaged in a war of words over whether Bailey tried to have his name removed from a report into the LCF scandal.
Dame Gloster’s report, published in December, was highly critical of Britain’s top financial watchdog, the Financial Conduct Authority (FCA), for its failure to spot and prevent the collapse of LCF. Around 11,000 small-time investors lost £236m ($325.1m) when LCF collapsed in early 2019.
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Bailey ran the FCA from 2016 until March last year. He was one of three individuals named in the report and singled out for criticism.
The report said Bailey had tried to pressure Dame Gloster into removing any individual names after seeing a draft version of the report. She told MPs on the Treasury Select Committee last week it was “inappropriate” to have names scrubbed from the report and said she was “surprised” and “irritated” by the approach.
Bailey hit back on Monday, telling MPs on the same committee there had been a “fundamental misunderstanding.” He argued that he had only sought to ensure he was not blamed for the collapse. He said he was happy to bear responsibility for the failure to regulate LCF, but not culpability.
“It’s not correct… that I did not want my name mentioned,” Bailey told MPs. “I’m probably sounding quite angry now and I am... I am angry about this... It’s just not right.”
Dame Gloster doubled down on her position on Monday evening in an email to Treasury Select Committee chair Mel Stride MP.
She said Bailey was wrong and reproduced the letter sent by Bailey’s QC, which she claimed showed he sought to “remove references in my draft report to responsibility resting with specific individuals.”
“To the extent that Mr Bailey’s evidence was that his representations to me were limited to requesting a distinction between personal culpability and responsibility... I must disagree,” Dame Gloster wrote. “I also reject his suggestion that there has been a ‘fundamental misunderstanding’ on this issue.
“As will be clear from the extract from Mr Bailey’s representations enclosed with this letter, Mr Bailey’s primary position in those representations was that references to him (or any other individual) having personal responsibility for the FCA’s regulation of LCF should be deleted. The distinction between personal culpability and responsibility was merely one argument in support of that position.”
Late on Tuesday, the Bank of England issued a statement on the matter. The central bank repeated Bailey’s claim that he simply wanted to distinguish between responsibility and culpability.
“At no point, was his intention to imply he did not take full responsibility,” the central bank said in a statement. “As the governor said yesterday and to Dame Elizabeth, he fully accepts responsibility for everything that occurred during his time at the FCA and welcomed the opportunity yesterday to reiterate that, and his apology to bondholders.
“As the governor said yesterday, Dame Elizabeth and he disagree on points of process and some of her conclusions but he fully respects her independence and does not propose to comment further.”
LCF was one of the biggest investment scandals in recent history. The company sold high-risk “mini-bonds” to investors, allegedly claiming they were in fact ISAs protected by FCA guarantees. The Serious Fraud Office is investigating the company and its directors.
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