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Taken before the Treasury Committee
on Tuesday 6 November 2012
Mr Andrew Tyrie (Chair)
Mr Pat McFadden
Mr George Mudie
Mr Brooks Newmark
Mr David Ruffley
Examination of Witness
Witness: John Griffith-Jones, Non-executive FSA Board member and Chairman Designate, Financial Conduct Authority, gave evidence.
Q1 Chair: Thank you very much for coming before us this morning, Mr Griffith-Jones. You have a very important job, particularly important since it is more than a successor institution; it is really a new organisation in a number of important respects. One of them is, of course, it has been given a new mandate. Why do you think it has been so difficult for new entrants to obtain banking authorisation?
John Griffith-Jones: We have had an authorisations process which is trying to achieve two things at the same time; on the one hand to encourage competition in the marketplace in the sense of letting people in and, on the other hand, trying to keep out the people who are not suitable to trust with our money. As I understand it, over the years, we have veered one way and the other to try to get that balance right, but I think it will always be a balance between allowing people in and encouraging competition.
Q2 Chair: Have we really veered both ways? Has it not been always veering on the side of what is comfortable for a regulator to have, which is no risks attendant with new entry? Where have all these new entrants been? There aren’t any, although in the marketplace, as I am sure you know, there is a lot of demand for it.
John Griffith-Jones: I guess it is fair to say that the regulator has a cautious attitude, but I think the events of the last four or five years have told us that that is quite a wise position to have but it has to be balanced by allowing new entrants in. The work that Lord Turner is currently doing on behalf of the FSA to look at, "Are we being unduly restrictive?" will yield some specific areas where we could do better, or faster at least. But the fundamental issue is having a secure ring fence around the banks that ensures that we do not have unsuitable people within the system.
Q3 Chair: A review is being conducted, is it not, in the FCA at the moment about all this?
John Griffith-Jones: Yes.
Q4 Chair: How close to that are you?
John Griffith-Jones: I am not specifically close to it. Lord Turner is doing that at the moment.
Q5 Chair: When that is produced internally, are you going to subject it to rigorous scrutiny internally?
John Griffith-Jones: I am certain that it will come through the FSA Board.
Q6 Chair: Is this the sort of issue you might consider having as one of your priorities?
John Griffith-Jones: Definitely going forward. When you split the organisation between the prudential and the conduct, authorisations is an area that both regulators are going to naturally have an interest in. So, we will, on the conduct side, need to carry out our side of the investigations, and the prudential people will no doubt wish to set the capital requirement.
Q7 Chair: Mr Griffith-Jones, did you have a chance to have a look at Sir Donald Cruickshank’s evidence to us?
John Griffith-Jones: Some of it, yes.
Q8 Chair: In there, he said that the Financial Services Bill as it stands, and I quote, "will have a minimal impact on the decisions of the FCA"-this is with respect to competition-"as competition will be a secondary concern". In other words, he is saying that the addition of the competition objective is for decorative purposes only. I do not think I am putting words in his mouth on the basis of the evidence he gave. What is your response to that?
John Griffith-Jones: It is very clear that I obviously come to this fresh. It is one of three objectives and it stands pari passu with the other two.
Q9 Chair: What about the relationship between those three and this new overarching objective that has been put on top of it?
John Griffith-Jones: I think to make markets work well is a statement of the necessary but not the sufficient. In order to make markets work well you have to have competition. That is one of the essential legs as is fairness in the market and protecting the consumer. So, I think it is absolutely fine, as one of three. What I think you are perhaps alluding to, or certainly I am aware of based on my role in the short time with the organisation, is that we have not, "Done competition in the past". So, in order to do it in the future, we again have to concentrate very much on that, upskill ourselves as fast as we can, work very closely with the OFT who have years of experience in this area and, above all, as we make decisions internally that we take into account the competition objective as well as the other two, which will be new. The measure of us will be whether we actually do that. So, I think it is unfair to say we are doomed before we start, but I think it is equally fair to say, "We will be watching you because this is the bit that is new to you".
Q10 Chair: And you are going to be watching it on Parliament’s behalf having noted Parliament’s deep concern about this expressed over many years going back to 2007, 2008, 2009 in this Committee?
John Griffith-Jones: I can assure you I absolutely will, and I am very much aware that I am surrounded by people who have been in the FSA for many years without this as an objective in the past. I, therefore, consider that I am the natural person to champion this objective along with this new division that we are setting up that we have explained a bit in outline here called PRR-Policy Risk and Research. We are recruiting a new head of that, which we are well on the way to. I do not think we have made an announcement yet but it is going to be someone with a very strong competition background and he or she and I, hopefully, will represent that interest in a balanced way within the organisation.
Q11 Chair: When you say that you are surrounded by people who have not previously had this in their veins, are you really saying that the FCA, the FSA has a cultural problem too that needs to be addressed?
John Griffith-Jones: I do not think there is a cultural problem; at least I would not say there is a cultural problem. I think people respond to the objectives that they are set. This now has been set very clearly as an objective. I can understand everyone being worried that we will not do it and you are making that point rather clearly. I think we are absolutely on notice, from everybody, that this is part of the job.
Q12 Chair: Well, you can hear a message coming through now.
John Griffith-Jones: Yes.
Q13 Chair: You mentioned that, of course, authorisation splits into two halves, mirroring the split of the FSA into two functions, one to go to the Bank and one is going to the FCA. Of course, the other half is that the PRA, ultimately, is responsible for these authorisations, not the FCA, and the Bill has gone all the way through its stages so far without a competition objective. Do you think that is a good idea?
John Griffith-Jones: For the PRA?
John Griffith-Jones: I think that is satisfactory providing we have one, but I am not the world’s expert on what the PRA’s objectives actually mean.
Q14 Chair: I note that, and perhaps you are not yet aware of this, although it is on the order paper and to some degree it is a reflection of my concern that you do not know, the Government has tabled a competition objective as an amendment in the House of Lords. I do not know-I am just being handed it now-what effect that will have and it will require some care and attention to think about that and the interaction with the competition objective acting as one of three that the FCA will have. Will you take a very close look at this and think this through on behalf of the non-execs and with the non-execs on the FCA?
John Griffith-Jones: I certainly will.
Q15 Mark Garnier: I want to continue with these barriers to entry for challenger banks and potential challenger banks. Are you aware of the freedom of information request I did on the FSA on 24 February from talking about those banks that have come through the initial process to actually getting licensed? To give you an example, in 2011 there were 10 institutions, aspirant banks, who made initial applications to the FSA to open the dialogue and of those 10, just two managed to get any sort of banking licence at the end of it. It is quite a sorry state of affairs, is it not?
John Griffith-Jones: There is a lot of work going on in this area in the organisation right now. I am not part of the working group, but I completely understand the concern that if we wish to open up the market we need to have an effective way to allow challenger banks or alternative business models to actually take hold. I am fully seized of the point and I am fully seized of people’s view that, in some ways and on some occasions, the FSA has-
Q16 Mark Garnier: How do you see yourselves working with the PRA in terms of banking applications going through on a practical day-to-day basis?
John Griffith-Jones: I think we have said in the document, but never mind what the document says, that it has to be seamless. It would drive the applicants wild if you get a disjointed process.
Q17 Mark Garnier: Are they going to have to make two applications?
John Griffith-Jones: No, they make one application and then we share it between us. I think we have made that clear. We both have our separate responsibilities to complete our own requirements but they will get one answer at the end of the day. Within the organisations it would be absurd if the PRA are saying, "This is a really suitable challenger bank" and we are saying, "We’re worried about its conduct". That would need an immediate meeting to thrash out the issue and decide whose views on balance prevail.
Q18 Mark Garnier: I have been speaking to people who have been looking to get a banking licence and the impression they get is that there is no incentive within the regulator to authorise banks but there is a big disincentive to authorise one that might subsequently go bust. Therefore, the individual errs on the side of caution. It is better to have not authorised somebody who does not go bust than it is to potentially ruin your future career. What are you going to do to try and change that culture?
John Griffith-Jones: Well, it is not a wholly bad culture.
Q19 Mark Garnier: It is not a wholly competitive culture.
John Griffith-Jones: Sorry. No it is not, no, there is just this inbuilt tension between the two. I am not being defensive, but I would not want to be responsible for allowing through a bank that went bust, so I have some sympathy with my colleagues taking a naturally cautious approach. But I am seized on the fact that if it appears, with hindsight, that people who are perfectly capable and seeking to set up a bank are in some way being put off or held up unnecessarily, it is up to us to change our procedures, or improve our procedures, so that that impediment is no longer there.
Q20 Mark Garnier: Do you see having more banks to regulate as a hindrance to good business? Do you see that as more work?
John Griffith-Jones: Absolutely not. No, I am not trying to expand my empire, the more the merrier, but I absolutely think we should be completely indifferent as to how many banks there are. As a regulator, our job is to regulate the banks that there are.
Q21 Mark Garnier: Have you had any discussions with VocaLink about the tensions of account portability?
John Griffith-Jones: Not with VocaLink as yet. I have talked to Andrew Bailey about how portability works and he has referred me, but I need to talk to VocaLink.
Q22 Mark Garnier: What are you views in general about account portability?
John Griffith-Jones: My view about portability is that it is highly desirable. As I am aware, the banks are offering what is called transferability, and I have not got to the bottom of whether transferability is essentially the same as portability or not. What I do understand, with my rather limited computer skills, is that to say you must take the same number the next day, if that costs the economy whatever to rebuild the systems to do that, whereas transferability would work with three or seven days’ notice. It may be that transferability is a good pragmatic step and we can see what portability comes next. The key thing is that the guy, or the girl, who wants to move their bank account can do so and this fear of, "Oh, my God will it all go wrong, will my standing orders not work?" has to be removed.
Q23 Mark Garnier: Do you see it as part of your role to promote competition within the banking sector?
John Griffith-Jones: Yes, absolutely.
Q24 Mark Garnier: So you are 100% behind it?
John Griffith-Jones: I am 100% behind it.
Q25 Mark Garnier: So we can test you in a year’s time?
John Griffith-Jones: You can. I am not naïve about this. I have not changed my bank account for 50 years but I have had every opportunity to. I cannot point at you or my predecessors and say, "I have been prevented from doing this", but I have not got round to it and I do not know how many of you have. I suspect not. Is it desirable that everyone changes their bank account every five years? No. As an objective in itself, regular changing of bank accounts is not a good one, at least to my view. But having the ability to change it when you are unhappy with your bank, or there is a better offer from someone else, is highly desirable.
Q26 Mark Garnier: I changed mine last month. It was six weeks of pure hell.
John Griffith-Jones: Well, there we are.
Q27 Teresa Pearce: Following on from some of the Chair’s questions, you have now spent some time on the Board of the FSA.
John Griffith-Jones: Yes.
Q28 Teresa Pearce: What have you learnt from that experience? Were there any surprises?
John Griffith-Jones: Yes, a few. I have been there six weeks, so these are very first impressions. On the one hand, I am genuinely very impressed by the technical abilities of the whole organisation, not just the Board. But I am struck by the extent of the waterfront. To be fair, the FSA Board still looks, on a legal plateau, at the prudential as well as the conduct. But the breadth of the agenda and the number of emerging issues tells me that, in principle, the splitting in two makes an awful lot of sense because it is just not possible for every bubbling issue to be treated as a priority under the existing structure. I am a new boy and of course I would say this, wouldn’t I? But I do genuinely welcome the ability to focus a bit more. But even then I am struck at how many things there are that are actually very important on the agenda with the whole organisation.
Q29 Teresa Pearce: Going forward, what would you seek to replicate from the FSA Board and, more importantly, what would you seek to avoid?
John Griffith-Jones: What I would replicate is the importance of having a strong Board. I am in favour of the unitary board system. I am in correspondence with the Treasury at the moment about the setting up of it. But I think if you are going to have a board at all, it must fulfil the function of designing or approving the strategy, the structure and then holding the executive to account as to whether the job is being achieved. It is not for me to judge how well the FSA has done that in the past but, meeting the people who are on the Board today, that is certainly what they are trying very hard to do and that is certainly what I would like to replicate. When it comes to what I would like to change, as I say, it is just the length of the agendas and the prioritisation of what is really important, but this is only within our grasp to a certain extent. There are lots of things that need dealing with. I guess we will have to have longer meetings to deal with them.
Q30 Teresa Pearce: Lord Turner has been a very active and visible Chairman of the FSA. You are a non-executive. How will you operate day-to-day in the FCA?
John Griffith-Jones: I am asked to do three days a week and, indeed, to be non-executive. I did not know Martin Wheatley before I started the job at all. We have got to know each other very quickly and we seem to be, I hope, extremely compatible. I do see him as running the show; there is no doubt about that. However, I think I have a particular role to play in talking to people outside the organisation as much as people inside. One of the things that we talk about a lot is forward looking and judgement based and taking into account the views of the consumers and firms. There is a lot to learn, as I have already discovered, by talking to people outside the organisation. In fact, you learn more talking to people outside the organisation probably than you do talking to those inside, and I think I can play quite a genuinely important part there in taking the views of lots of constituent parts of the economy from outside and bringing that back and saying, "Are we really dealing with this effectively?"
Q31 Teresa Pearce: How will your public role be? How will the public view you? Do you expect to be a very visible person?
John Griffith-Jones: I expect to be visible if needed, but I expect to be very visible with people like the Citizens Advice Bureau, the firms that we regulate themselves and bodies that represent them. If I need to make a public statement, I will not hesitate to do so.
Q32 Teresa Pearce: I am particularly interested in the FCA’s consumer protection objective, which has many different strands. One of the things it says is that there should be a general principle that consumers should take responsibility for their decisions. Yet at the same time, it talks about the differing degrees of experience and expertise that different consumers have. I was interested that one of the things that you have been very active in is numeracy
John Griffith-Jones: Yes.
Q33 Teresa Pearce: Obviously, financial education and national numeracy. Do you see that particular interest of yours having a great bearing on the consumer protection objective? With regard to the general principle that consumers should take responsibility for their decisions, clearly, that is all very well if someone is financially educated and numerate, but given that you have that other interest, are you going to keep a close eye on how this actually works in practice for all strands of the community?
John Griffith-Jones: I certainly intend to. I have been interested in numeracy for some time; I did this thing called Every Child Counts before that. The simple background to that is that I always thought that, accountants being numerate, that was our contribution. We should, at least, take an active interest in that area. Because what I have learned from that is there are some people-quite a sizeable part of the population-who are really quite innumerate, at least in the terms of what you and I might describe as innumerate, and there is an asymmetry of "power" between the financial organisation and the consumer, and this is really worrying. The general principle has to be that people have to look after themselves, otherwise I have a big job to do.
Q34 Teresa Pearce: But they have to look after themselves according to their ability?
John Griffith-Jones: I am acutely aware that a bank thinks they are being absolutely clear when they say that the interest rate on this, or the APR, on this product is 5% and indeed it is true, and mathematically there is no hidden catch, but the person who is reading this does not understand what 5% actually means. Then you get this, "Well, is 5% better than 6% or 4%?" which is so obvious to some people and not quite so obvious to others. So, I think we have to segment the population. If we try to treat everyone as though they cannot add up, then we create a whole bundle of cotton wool around-and basically the consumer protection will invade the competition space inevitably. But if we do not do anything, then we will have people disadvantaged who are in the less numerate category. The simple thing is to try to segregate the marketplace to make sure there are simple products that everybody can understand at one level.
Teresa Pearce: Thank you. I shall carefully watch that going forward.
Q35 Chair: Have you discussed the core curriculum aspects of that with the new Schools Minister?
John Griffith-Jones: No. I would love to but I have not. Well, when I say I would love to, National Numeracy, of which I am on the Board of-
Q36 Chair: It is an issue that this Committee and also the Banking Commission has already expressed an interest in.
John Griffith-Jones: As I say, I am a trustee of the organisation but my colleagues have been in regular touch with the Ministry. I do not know whether they have specifically talked-
Q37 Chair: But it is relevant with respect to your duties.
John Griffith-Jones: It is highly relevant, yes.
Q38 Chair: Given the sometimes heated discussions about the FSA’s role in the education field that have taken place over the FSA’s relatively brief life.
John Griffith-Jones: Lord Turner, for my sins, has asked me to look at MAS, which is where we interface with this. It is one of the first things for me to get on with.
Chair: Well, we are going to come back to that later on.
Q39 Jesse Norman: Mr Griffith-Jones, you are, I think it is fair to say, a former CEO of KPMG?
John Griffith-Jones: Yes.
Q40 Jesse Norman: And also Chairman and senior partner in the UK of KPMG and joint Chairman of KPMG in Europe, is that right?
John Griffith-Jones: That is right.
Q41 Jesse Norman: Am I right in thinking that KPMG were the auditors to Halifax Bank of Scotland?
John Griffith-Jones: Yes.
Q42 Jesse Norman: How would you describe the audit work that they did for Halifax Bank of Scotland?
John Griffith-Jones: If you will allow me to, I think you need to put this in context of the overall regulatory set-up as it existed.
Jesse Norman: Sure.
John Griffith-Jones: And the fact is that there were, as you know probably better than I do, the financial regulators, the rating agencies, the Treasury, the auditors, the banks themselves, the non-executive director, a panoply of people all basically designed to prevent bad things happening. We all know, with hindsight, that a very bad thing happened in terms of the credit crunch and HBOS was one of the companies that got caught up with and then, in due course, overwhelmed by the crisis.
Q43 Jesse Norman: But they did accept specific responsibility, didn’t they, to report on the wellbeing of the bank’s balance sheet?
John Griffith-Jones: Indeed. I think it is really important that we get a little bit technical and just say what was, not maybe what should be going forward, but what were the duties of the auditor and the purpose of the audit. Although there is quite a lot of stress, the primary point was to report on the numbers as of the year end.
Q44 Jesse Norman: You mean report whether the numbers were true?
John Griffith-Jones: True and fair.
Jesse Norman: Accurate.
John Griffith-Jones: Yes. On the whole, the numbers were accurate at each of the year ends. What was not known, certainly at the 2007 year end, was what was going to happen all the way through 2008. I can assure you of this, had it been known the accounts would have been qualified, but it was not that we had our head in the sand trying not to know what was going to happen. You actually have to go back and read the contemporary press articles, the Bank of England quarterly report. No one realised how serious it was until December 2008 by which time it had all happened, essentially.
Q45 Jesse Norman: Right, but no-one had KPMG’s access to management or to management accounts or to any of the detailed financial information within that organisation, and that organisation was a hopeless, hopeless mess in which enormous numbers of shortcuts had been taken in order to create a balance sheet that bore no relation to reality. It has been censured by the FSA. We are perfectly clear about the status of HBOS, are we not?
John Griffith-Jones: I believe, certainly, that the accounts of HBOS did bear a sense of reality, but you are talking about the systems and procedures, I think, and the attitude to risk within the organisation, which maybe it is not for me to talk about.
Q46 Jesse Norman: All of which are things on which the auditors would be expected to have a view, would they not?
John Griffith-Jones: Well, I think is where we need to be a little bit careful because the auditors’ duty is to report on the truth and fairness. The auditors are not, and certainly were not at that time, responsible for the decisions of management about the risk profile of the organisation, unless they thought it was going to cause the organisation to get into difficulties within the year.
Q47 Jesse Norman: Has it ever been your view that auditors should not challenge their clients outside their own remit?
John Griffith-Jones: It has been, and it certainly is with the benefit of hindsight.
Q48 Jesse Norman: Your view that they should not challenge clients outside-
John Griffith-Jones: No, my view that auditors should be allowed, privately, to challenge or to at least discuss-I am not sure whether the word "challenge" is quite right-but at the end of the day, if the auditor says to the client, "I think your business model is quite risky" it is perfectly within the ambit of the client to say, "I couldn’t agree more" or, "I couldn’t agree less, but in any event your job is to do the audit and it is the management’s job to control the risk."
Q49 Jesse Norman: Could you give me some examples of when you have done that in audit situations or in client situations with KPMG as a firm or you personally.
John Griffith-Jones: I will go back quite a way in time when I was responsible for some companies that had done some quite highly leveraged transactions and we used to have long discussions with the client about what level of leverage, never mind about what the bank would lend, but what was a sensible-not sensible-safe place to go.
Q50 Jesse Norman: I am just trying to get to how independent you are going to be as Chairman. It says in the legislation that the FCA Board will publish a record of its meetings.
John Griffith-Jones: Yes.
Q51 Jesse Norman: Is that the same thing as minutes?
John Griffith-Jones: Yes, I think it is abbreviated minutes. There are certain things that we discuss at the Board-I am already aware of this having been there for a few occasions-which are extremely sensitive and, therefore, the details could not be put in the public domain.
Q52 Jesse Norman: So, things that are not sensitive. What is commercially confidential gets left out but everything else goes in?
John Griffith-Jones: Yes.
Q53 Jesse Norman: That would be the idea?
John Griffith-Jones: Yes.
Q54 Jesse Norman: The tendency, in line with good practice and transparency, would be to make them as like the MPC Board minutes as possible?
John Griffith-Jones: I am a great believer in transparency, to the extent that unless it is commercial in confidence, it seems to me that there is no reason why they should not be published.
Q55 Jesse Norman: That is extremely helpful. Can you just tell me, if we need information in order to do our work as a Committee, and if Parliament needs such information, will the FCA Board be prompt and full in responding to such requests?
John Griffith-Jones: That would be my intention. I am sure you will write that down, but I mean that.
Q56 Jesse Norman: We are writing everything down. You are the boss, so the answer is yes?
John Griffith-Jones: Yes.
Q57 Jesse Norman: If we asked you, will the FCA Board, or FCA, undertake respective reviews of its own policies and performance?
John Griffith-Jones: I think we have to see what you ask for. Prima facie, if you want something done, it is probably because an awful lot of other people want something done as well, so that makes a lot of sense. Ultimately, I think we have to have some sense of proportion as to what merits investigation and what does not.
Q58 Jesse Norman: You might take the view that something was frivolous or burdensome beyond its actual value.
John Griffith-Jones: I would try not to. Genuinely, I come from a very transparent background. I absolutely do believe that full disclosure of argument on both sides and what actually happened is a good thing.
Q59 Jesse Norman: And you would be happy to hold yourself to account to us in the event of such requests?
John Griffith-Jones: Put it this way, in the event that, for whatever reason, we felt we could not do it, I would expect to be, and know I would be anyway, cross-examined as to why it was not possible.
Jesse Norman: Thank you.
Q60 Chair: The word we used in our report on this, which I am sure you have seen, is that we would expect you to respond fully to reasonable requests.
John Griffith-Jones: Yes.
Q61 Chair: I am sure you would be happy to go along with that.
John Griffith-Jones: I would.
Q62 Mr Mudie: When we saw Lord Turner over MAS, we gave him a hard time and afterwards I felt like apologising because papers emerged that showed he and the Board were totally dissatisfied with the accountability arrangements between the department and MAS to the extent that they suggested to the Government that if they did not change them they should take it from the FSA. Now, what is happening with this? Have there been any negotiations? Have there been any changes?
John Griffith-Jones: As far as I am aware, and on this I am reasonably aware, that correspondence got to where it got to; you have seen it and the matter rests. Actually, nothing has changed. We are required, as I am sure you know, to review the budget and the business plan, but at the same time they have an independent board and a set of things to do.
Q63 Mr Mudie: No, but the gist of it was that they had an inadequate business plan. They had strange priorities in spending. They had overpayment of the chief executive. All those things the FSA knew, but they were saying, "The accountability arrangements prevent us from doing anything about this." Is this going to be the same situation with next year’s budget?
John Griffith-Jones: No. What is happening at the moment, and I am literally one meeting into this, is that we are conducting a review right now of next year’s budget and business plan of MAS.
Q64 Mr Mudie: Do you have a business plan for MAS?
John Griffith-Jones: We have a draft. We are having discussions at the moment about the business plan for the year starting next April. Yes, we are discussing that with them and we are frankly having, what you might call, a robust exchange of views about what they want to spend the money on and whether it is the right thing. What we really need, and which we have powers to ask for, as I understand it, is a value for money study, because it is one thing for you or me or anybody to review the business plan, but if I do not like it and the Chairman of MAS does like it, the matter rests uncomfortably in no man’s land. I am fully aware there are a lot of people who are asking why MAS spends so much money, for example, on its marketing budget.
Q65 Mr Mudie: I am delighted to hear that there are discussions about a value for money plan, but it still comes back to the same question. If you are dissatisfied with the business plan and the budget, do you see yourself as having any powers, apart from not signing it off, to induce MAS to change what is in the budget?
John Griffith-Jones: Having met the people at MAS, I do not think it is as bad as that, we are having a very good discussion.
Q66 Mr Mudie: No, no. You may meet them and they are charming, and so on, but let us get away from the personalities. If, as happened last year, you are dissatisfied with the business plan, you are dissatisfied with the amount of money spent on marketing, you are dissatisfied with the chief executive’s salary, if that continued, or if an issue arose where you were dissatisfied and MAS said "Tough", what do you see your powers are to change MAS’ mind?
John Griffith-Jones: As you know, it is not clear. I would need to go and talk to-
Q67 Mr Mudie: That is my first question. It was not clear last year. It was accepted by the FSA that it was not clear. Now, we have the Minister coming in two weeks’ time and this is a question for the Minister. If FSA say they cannot be held accountable under these arrangements for MAS, what is the Minister going to do? You are saying for this coming budget nothing has changed to alter the FSA views about the accountability arrangements.
John Griffith-Jones: Nothing about the arrangements, but what has changed is that, based on the dissatisfaction shown last time round, a much greater energy and effort is being put in to ensure that we do not get to the same position. Also, there is an awareness at my level and at Martin Wheatley’s level that if we are in danger of getting to a stuck position, which is what you outlined, we go and talk to the Treasury again and say, "Look, these arrangements, as they are, are not very satisfactory, and we are having an argument about what is the right thing. What do you want us to do?"
Q68 Mr Mudie: Now, one thing you do accept is Martin’s loyalty to board appointments.
John Griffith-Jones: Yes.
Q69 Mr Mudie: Now, the chief executive resigned after seeing us. Have MAS appointed a new chief executive and were you consulted on the salary level?
John Griffith-Jones: The answer to the first question is no, not yet, we are being involved in the selection process and we have been in discussions with them about the salary level there.
Q70 Mr Mudie: Are those discussions finished?
John Griffith-Jones: Can I get back to you on that?
Q71 Mr Mudie: On the salary?
John Griffith-Jones: On the salary, I think they are, but you are going to ask me what the number is and I do not know, but I think I can let you know what has been decided.
Q72 Stewart Hosie: Mr Griffith-Jones, the Government has proposed giving the PRA a veto over the FCA where, in the opinion of the PRA, the FCA does something that would threaten the stability of the UK financial system. This Committee’s view is that the issue of the veto has not been given enough prominence. Indeed, there is a question as to whether the PRA should have the veto at all or whether it should sit with the FPC. What is your view on the veto generally and where it might sit?
John Griffith-Jones: Again, I come at this relatively fresh, and it is clear to me that someone has to have the last say and that when push comes to shove, it is entirely natural that it is with the prudential side of the equation rather than the conduct side of the equation. I sit very comfortably with the fact that a veto used responsibly is a necessary piece of the equipment and I would rather it was set out clearly because if it was needed, it would be needed in a great hurry. So, whether it should sit with the PRA or the FPC, I have to admit, from a conduct perspective, I am less concerned about, providing it is clear how it should be used. I am comfortable, having understood the arrangements as I see them, that the PRA would be perfectly capable of using it properly and given the role they have, it seems like that is a pretty sensible place for it to sit.
Q73 Stewart Hosie: Just a little follow-up on that. I understand, as you do, there needs to be a decision made somewhere. Given the FPC will be the people looking at the macro-prudential, the PRA is effectively the micro-prudential, the company specific, is there not more merit in it with it being the FPC rather than the PRA?
John Griffith-Jones: To be really honest, I do not know enough to know the answer to that question at this stage. I am comfortable, from the FCA’s perspective, that Martin Wheatley will sit both on the FPC and on the PRA and, as you know, there is really quite a lot of overlap of the personalities involved, if not the roles. I am pretty confident that this will work. Having now met the people, I am pretty confident that this would work in practice perfectly well as it is.
Q74 Stewart Hosie: That is helpful. The interface between the FCA and the PRA is going to be incredibly important for the twin peak system to work. So how will your FCA supervisors know at what point to involve the PRA when conduct issues are identified that could have prudential consequences? What will the trigger be for an FCA person to pick up the phone and say, "Houston, I think we have a prudential problem"?
John Griffith-Jones: Firstly, you are completely right. This whole structure depends on there being a good working relationship between the two and that will be the role of the supervisor and the head of the supervision department to ensure that sufficiently serious conduct breaches, let us use that expression, get transmitted in real time, not in monthly or quarterly catch-ups, to the prudential supervisor. That is what is going to happen, and needs to happen.
Q75 Stewart Hosie: On a practical point then, how will you ensure this real time communication is done in a sufficiently robust and formal manner that it is auditable in the future?
John Griffith-Jones: Without being a complete master of the detail, I think it is essential that it is recorded because when it goes wrong, people will want to know why it did not happen. So, it is in our great self-interest, or the Government’s interest, to make an accurate record of when we feel the need to correspond with the prudential supervisor.
Q76 Stewart Hosie: To what extent do you think that giving either the PRA or the FPC, but let us say the PRA, the veto, do you think that reinforces the impression the FCA and conduct issues are generally secondary to prudential issues?
John Griffith-Jones: Do you know, I have been asked that question and, indeed, when I applied for the job, people were making that point to me. I just do not see it. The circumstances in which the veto would be used are sufficiently serious that someone needs to be in charge and it needs to be them, but for 99% of the time, having the two lenses-us looking at conduct and them looking at the prudence-is a much better way of identifying issues. I suspect, if we ever get back to a "normal world" that the conduct people will be coming across many more instances of public interest than the prudential people. Although you could say they have the veto, we are far more likely to be in the news on real issues than the prudential people. I certainly hope so.
Q77 Stewart Hosie: In terms of issues which are accessible to the public, I think there is no question but that that will be the case. But can you describe a scenario when the PRA might exercise this veto. I have struggled to see, in terms of what the Government have said, when the PRA would exercise a veto over the FCA. Can you envisage a scenario, for example, where it might happen?
John Griffith-Jones: We do not talk about it internally, so I hesitate, but if you push me a bit-
Q78 Stewart Hosie: I am pushing you a bit and I am wondering why you are not talking about it internally given that it is a big stick someone is wielding somewhere, hopefully never to be used, but nevertheless.
John Griffith-Jones: If there was a circumstance where we wanted to issue a sufficiently big fine or ban of a product to actually affect the stability of one of our major banks that in turn would affect the stability of the system, I could envisage the prudential guys coming to see us to say, "Could you not do that?" or, "Could you do that in some other way?" I think they would be doing their job if they did. How likely is that to happen? I am not sure.
Q79 Chair: But again, is that a matter for the PRA or should that not be a decision of the FPC really? You used the word "system" there; it is a crucial word you used.
John Griffith-Jones: Mr Chairman, as I say, I am ducking a little bit on where it should sit because I do not think I have a strong view.
Chair: That is fair enough.
John Griffith-Jones: But to be fair, if we were fining Bank A, PRA are responsible for the regulation of and the wellbeing of Bank A , whereas the FPC is for the whole thing. But we may be playing with words here because if Bank A would bring down the whole system then-
Q80 Chair: But institutionally, when you are playing with words, when deciding which institution will have this very considerable nuclear power and, therefore, which of these it is that has a bearing on the relationship between them in the long run- Anyway, you have said that you have not thought about it fully yet but you will reflect on it further.
John Griffith-Jones: Yes.
Q81 Stewart Hosie: Just one final question. It is a personal question, I suppose. How will you feel, or how would you think you would react, if you felt a veto was put in place that was unjustified or would threaten the objectives of the FCA?
John Griffith-Jones: I presume I would feel unhappy, but I am acutely aware that the whole theory of separation is that we do not then immediately have an argument between the two bodies. That would really make the whole thing look as though we had not still got the system right. I think we have a huge responsibility not to get to that position. There is a difference between, "I personally do not think you are doing the right thing" and, "I really do think that you are doing the wrong thing." We should swallow if it is the first. Ultimately, if we really disagree on the latter, the veto is the veto. That is why they need a veto.
Stewart Hosie: I think we may come back to this.
Q82 Chair: Everybody sets out with heaps of goodwill with these institutions, and we need to be very careful we do not repeat the mistakes of the tripartite where I heard very similar soothing words from the Ministers and others when I was on the Financial Services and Markets Bill about how everybody would work together and co-operatively and the system failed its first test dreadfully, largely-or partly at least-we are told, because all parties rushed off to fight their respective institutional corners based on their statutory obligations. It is those very obligations that we are now examining in Parliament. That is why we are asking these questions.
John Griffith-Jones: I entirely understand. I can only repeat that I am happy to have the veto exercised over me because I can see that is necessary, and no doubt my views will be refined as to whether that is better from the FPC or the PRA.
Q83 Mr McFadden: Mr Griffith-Jones, you were quoted in The Daily Telegraph in June of this year as saying, "They key is to get London working and the City pre-eminent in financial services. Rebalancing by chopping away at the big bit seems a pretty foolhardy way of growing the economy". Could you just tell us what makes a bigger contribution to UK GDP, financial services or manufacturing?
John Griffith-Jones: My understanding is that it is financial services, but I do not believe that is the case.
Q84 Mr McFadden: Why are you so hostile to manufacturing, to the activity of making things, when Government has said that this is the way we want to see economic growth in the future?
John Griffith-Jones: I do not think I have ever declared any hostility to manufacturing.
Q85 Mr McFadden: "It seems a pretty foolhardy way of growing the economy." It does not sound like a vote of confidence in manufacturing.
John Griffith-Jones: I know what I was trying to say or I know what I think, in any event, which is that having worked in the City all my life, and although there are some bad parts, it is an important part of the economy and if you want to grow the whole economy, if you want to reduce a chunk of it, whatever it is, the 10% or 15%, you make the overall growth target more difficult.
Q86 Mr McFadden: Can you tell us what proportion of GDP financial services makes to the economy? You called it, "The big bit". How big a bit is it?
John Griffith-Jones: I believe it is in the low teens.
Q87 Mr McFadden: Is that right?
John Griffith-Jones: It depends on whether you add in the associated services.
Q88 Mr McFadden: You will have seen the stories in recent weeks that some banking groups are removing incentives for product sales. Do you in your new post take a view on whether commission should be abolished for front-line sales or products such as PPI, interest rate swaps and so on?
John Griffith-Jones: I am sure you know the RDR regime comes into operation on 1 January, and this is basically going to reduce an awful lot of commissions in the system and substitute them with fees. On the whole, I am entirely supportive of what has been debated for the last three years, before coming into effect on January 1st. If you look at these current issues which you specifically refer to, PPI and the interest rate swaps, I think that is more about mis-selling and-
Q89 Mr McFadden: It is more about incentive to sell, if you are getting paid to sell more?
John Griffith-Jones: Yes, sure.
Q90 Mr McFadden: Would your organisation consider banning the use of commission in front-line sales?
John Griffith-Jones: You mean commission to the salesperson within the bank?
Mr McFadden: Yes, to the person selling the product to the customer in a way that Lloyds and Barclays have already said they are going to do.
John Griffith-Jones: I think that is a very positive move. There is a major distinction between encouragement and actual outright banning and that will be a finely balanced judgment as to how far to intervene in order to achieve the objectives. If the objective is for the customer to be treated fairly, and that must be the top priority, whether it is necessary to actually totally ban commission, as opposed to moderate it, or to bundle it with other factors, I think we should wait and see.
Q91 Mr McFadden: I am going to take that as a no. If you are reluctant to take action on commission in front-line sales, I assume that would also be the case in other parts of financial services, mergers and acquisitions, and so on?
John Griffith-Jones: You say take that as a no, I think it is a question of degree, and the balance and the whole reward structure is extremely important to behaviour. I have seen this all through my KPMG career in many organisations; I do believe that incentives for the workforce have a major impact on the way people behave. I am not suggesting that this is an area of no interest or, indeed, not an area that has caused a lot of issues in the past. It is absolutely at the top of the agenda and as I am sure you are aware, Martin Wheatley did a short piece of work very recently where we looked at 22 financial institutions and their reward structures and we absolutely did not like what we found. This is very high on the agenda.
Q92 Mr McFadden: You say this is at the top of your agenda.
John Griffith-Jones: Yes.
Q93 Mr McFadden: Can you tell us what action you propose to take on the sales incentives then?
John Griffith-Jones: The first thing we need to do is to understand, because they are different in different banks and they are different in different segments of the market. But to the extent that we believe that they are leading to bad conduct, we would seek to ask and ultimately to insist that they are changed. I think that is the way forward.
Q94 Mr Newmark: Over recent years we have seen the building societies gobbled up and the competitive landscape shrink and shrink so that today we have an oligopoly of high street banks that have effectively 80% of the market and I am really following up on what the Chairman was talking about. The challenge we all have is to break the oligopoly of the high street banks and-as an MP; and this is a challenge all of us have-the need to get capital to SMEs. If that is the challenge that we have there, and there are loads of other people that have access to capital, have capital, asset managers and so on, who do you believe are suitable capital providers that are fit and proper to get banking licences out there today? I do not mean individual names. What type of people?
John Griffith-Jones: There is no doubt the venture capital industry could. There is no doubt that other overseas banks could. There are probably not so many entrepreneurs within the financial services sector. There are several insurance companies, typically, who might be prepared to move into the banking arena should they see the opportunity to do so. But they need a return on capital just like the existing oligopolistic players and, as we all know, on the one hand we want more competition, on the other hand, the banks at the moment are-
Q95 Mr Newmark: But there is an urgency to get capital to SMEs.
John Griffith-Jones: Correct.
Q96 Mr Newmark: Clearly, there is a log jam in the regulatory system for whatever reason. I am just curious as to where you see that log-jam today. How can one go about breaking up that log-jam and in what timeline, because we cannot wait another two, three or four years for some more entrants to come into the market?
John Griffith-Jones: Obviously, the sooner the better. But historical experience has shown that challenger banks or new entrants are going to have to pedal extraordinarily fast to make an impact in a two-year timeframe as compared to releasing, in some way, through the prudential measures and the capital adequacy measures, money from, as you say, the 80% that is dominated by the big players. Going back to our earlier conversation, I think we should be doing our bit to free up the authorisations process to the extent that we believe we can, or to the extent that we are pushed harder to do that, and that would be admirable. But the real key to releasing money very quickly is with the 80% rather than with the incremental challenger. I am not saying that because I want to say it, but the maths-
Q97 Mr Newmark: Yes, but then you still have the problem because they are pulling in their horns, they are building up their balance sheets, they are trying to improve their liquidity and, therefore, the behaviour of the big banks with respect to small and medium sized enterprises, is really unlikely to change in the near future. I see nothing out there that is going to change the behaviour of credit officers and so on and those in the leadership of the banks. Therefore, I guess I see a little bit more urgency out there to try and get other people in there who can provide capital.
John Griffith-Jones: I am seized of the point, and to the extent, as I say, that we are blocking people, and especially if we are blocking them unnecessarily, then absolutely the onus is on us to do something about it. But I do think that the capital rules and the whole issue of rebuilding the balance sheets and over what timeframe is the thing that will have the biggest impact on this within a two to three-year timescale. I entirely agree that new business models on a 10-year horizon could be very different, but I do not see quick fix.
Q98 Mr Newmark: Following on in Mr McFadden’s direction, what more do you believe can be done to regulate investment bankers?
John Griffith-Jones: To regulate investment bankers?
Mr Newmark: Yes.
John Griffith-Jones: I think the whole ring fence debate is very interesting, and we appear to be going into a good place there. The key, at least for my organisation, is the question of conduct in the investment banks, because splitting a bank into retail and investment banks is all very well, but if the behaviour in the investment bank is bad and the behaviour in the retail bank is better, I do not think that is going to be good enough. So, I am as interested in the behaviour in the wholesale side of the business as in the retail. The reason for that is not just because I am interested but the repeated examples where the behaviour within the wholesale division has made money for the wholesale players at the expense of the retail players. I think it is just as important that the standard of conduct in the investment banks is as high as it is in the retail banks, and that requires us to supervise and to monitor and do all the things we do in both segments equally. I suspect there is room for improvement in the investment bank.
Q99 Mr Newmark: Given that investment banks tend to sell to more sophisticated investors, do we need to be thinking a little bit more about what is a sophisticated investor going forward than we have in the past? There are the widows and orphans, who I believe were the victims of what maybe Mr McFadden was focusing on, there have also been, I guess, victims who are deemed to be sophisticated investors and are deemed to be not needing as much regulation as people at the smaller end of the scale. Does that need changing? Do we need to focus on that more?
John Griffith-Jones: The key is, as I think I said earlier, segmentation. I do believe that people who are experienced in financial affairs need a lower threshold of protection than people who are not. It is quite difficult to legislate for that or devise rules, but the principle that people who regularly interact with investment banks should understand more of what is going on than people who have never interacted with them before seems to be a pretty sound one. I have to say, though, that if you look at the various things that have gone wrong, the sophisticated people are pretty keen to claim when they lose money just like everybody else. If you play the game you have to be prepared to take the consequences if you lose money. The protection should be for the people who need it the most.
Q100 Mr Newmark: My last question has to do with a huge part of the cause of this whole crisis. Do you believe that there needs to be greater transparency on assets held in CDOs and CLOs and pooled assets such as that? Banks were clearly selling on to sophisticated investors pools of assets that they did not really understand, either the person selling or the person buying, what were held in those pooled assets. There were a lot of rotten eggs in those pooled assets.
John Griffith-Jones: No, I entirely agree and that is one of the great learnings of the crisis. But it is to my point of how stuff leaches out of the wholesale market into the retail market. It starts as a sophisticated deal between a big American investment bank and a big European investment bank and ends up packaged up into units that are sold to the public in slices that are allegedly safer because they have been sliced in a specific way, and all of that turned out to be wrong. That is why you need to regulate in the wholesale market, or at least down the chain to the retail. If you only look at it at the retail end, it looks perfectly clean by the time it gets there. If you do not look at the wholesale-
Q101 Mr Newmark: If you sat in front of me in a year’s time, should I be disappointed if I did not see this particular part of the market cleaned up, which has not been cleaned up, with greater transparency out there in the market?
John Griffith-Jones: The first step is greater transparency. I am not sure the cleaning up has to follow the transparency. I am not ducking the point, but there is quite a lot to look at in that area. But the general principle that the conduct is as important there and that things can go just as badly wrong, in fact possibly worse wrong, is not lost on me as I start the job.
Mr Newmark: Thank you.
Q102 David Ruffley: What I am looking for in a Chairman of the FCA is a robust chairman. So, I want to ask some questions about the role of chairmen in regulatory bodies. As a practitioner, you will have observed from afar the performance of the FSA Board in 2007, 2008, in particular, when the crisis happened. Do you think the FSA Board did a good job during that period?
John Griffith-Jones: Obviously I was not on it and so I am a spectator.
Q103 Mr Ruffley: I made that point fairly obvious. You were a practitioner and I said you saw it from afar. I want to know do you think it did a good job?
John Griffith-Jones: Well, I do not think it did do a particularly good job, but then I do not think that a lot of people did a particularly good job.
Q104 Mr Ruffley: I did not ask about other people. I asked about this Board.
John Griffith-Jones: I understand, and I said no. With hindsight-
Q105 Mr Ruffley: Why didn’t you think it did a good job?
John Griffith-Jones: Well, the root cause, I think, is that none of us saw what was coming.
Q106 Mr Ruffley: Do you think that was because the members of the FSA Board at the time were technically incompetent or lazy?
John Griffith-Jones: Probably neither. I do not know them personally, person for person, but I am sure, as the Board would do today, they were doing their best based on the information that they had in front of them.
Q107 Mr Ruffley: Next question. You will know-I hope you have done your homework before taking this position, that this Committee had to get the current Chairman of the FSA, dragging and screaming, to publish in full a detailed report on the FSA’s inquiry into RBS, and their performance in relation to the RBS debacle. We were offered a one page press release for starters and then, through the Chairman’s efforts and this Committee’s efforts, we got a bit of accountability. What did you think of that original decision by the FSA to do a one page press release?
John Griffith-Jones: I am sure that where we have got to now is a better place.
Q108 Mr Ruffley: Do you take lessons in being obtuse or is it just your natural manner?
John Griffith-Jones: No, no, listen. That is a little mean.
Mr Ruffley: It is not.
Chair: Take your time to answer the question.
John Griffith-Jones: No, I believe that the full report is what is required and, in fact, there is a provision, as you know, in the Bill that if things go wrong in the future we can be required to produce a report. That seems to me exactly the way it should be, but I do not know the people who were involved in 2007 and 2008 and I do not wish to cast aspersion on them as individuals but I would agree, going forward, that if something went significantly wrong that we should have a report as to why it went wrong. By the way, as the Chairman of a Board, irrespective of whether it is of sufficiently large a thing to merit a public inquiry, a Board should know what goes wrong in its organisation anyway so that we learn the lessons going forward. I am not arguing with you.
Q109 Mr Ruffley: No, I am not sure you answered my question but we are going to have fun in seeing you again, I hope. You are now, since September this year, a member of the FSA Board?
John Griffith-Jones: Yes.
Q110 Mr Ruffley: Good. You will have seen, and had discussions no doubt as a member of that Board, about a fully transparent report being published by the FSA-on which you currently sit, so do not say you do not know the people, you are on the Board now-on Lloyds HBOS.
John Griffith-Jones: Yes.
Q111 Mr Ruffley: When will a report be published, put in the public domain, that Parliament and the general public can discuss and debate?
John Griffith-Jones: My understanding is the report will be finished sometime next year, and the speed with which it is done somewhat depends on various things that have to happen before a report like that can be published, not least the Maxwellisation process and the review by the independent people that I believe the Chairman is in the process of appointing, or just has appointed. But when you add all that together, I am expecting mid-next year.
Q112 Mr Ruffley: Are you expecting a weighty report? I do not ask you to give me an estimate of the number of the pages and I am assuming it will be more than a one page press release, but is it your understanding this will be a weighty report of the kind of magnitude that we saw in the case of the RBS report?
John Griffith-Jones: Yes, that is my understanding.
Q113 Mr Ruffley: You are keen for a serious piece of work to be published?
John Griffith-Jones: Yes.
Q114 Mr Ruffley: Tell me what you understand are the powers of the FCA to bring criminal prosecutions in the case of wrongdoing. Just outline for me the criminal sanctions in the organisation of which you are Chairman designate.
John Griffith-Jones: We have an enforcement division which is allowed to bring prosecutions or enforcement actions for breaking its rules. If you wish to go through the-
Q115 Mr Ruffley: I wish you to demonstrate an understanding to us of what are the criminal sanctions that your organisation, the organisation of which you are Chairman designate, has at its disposal. I ask a very specific question. It was insupportable, in my view, that large numbers of regulators have come in front of this Committee and committees of this House of Commons, being palpably unable to list what the criminal sanctions are. This is not techy legal detail, this is something a regulator should have at their fingertips. What I ask from you, Mr Griffith-Jones, is to list now-do not get back to us-tell us what your understanding is of the criminal sanctions at the disposal of your enforcement team and what is at the disposal of the FCA.
John Griffith-Jones: Can you listen please? I cannot give you a list in the way that you are asking.
Q116 Mr Ruffley: Why not?
John Griffith-Jones: But I do understand-
Chair: Sorry, just let the witness answer the question. He has had several starting goes at this and now we would like to see the rest of the answer.
Mr Ruffley: Listing the criminal sanctions, that is the question.
John Griffith-Jones: Yes, and the criminal sanctions are that if an individual breaches the law that we can either act on our own or in concert with the SFO to bring a criminal prosecution.
Q117 Mr Ruffley: For which criminal offences? Can you list them?
John Griffith-Jones: I cannot sit here and list them all, no. But if you take insider trading, theft, Ponzi schemes, these are criminal activities and there is a decision made as to whether someone is prosecuted or not.
Q118 Mr Ruffley: I am surprised you are not able to answer that question because it is a very current debate right across the political parties in both Houses as to whether or not criminal penalties are sufficient. It may be that they are there and not being used. It may be that the criminal sanctions are not there and Parliament has to legislate. I am staggered, Mr Griffith-Jones, that you are not prepared to sufficiently answer that question in front of this Committee, and what I would like you to do is to go away and do your homework and furnish this Committee with a list of the criminal sanctions-the actual offences, whether statutory or common law-that are at the disposal of your organisation. If you cannot do that, I would actually respectfully suggest that you should go away and do your homework properly. Will you provide that list to the Committee?
John Griffith-Jones: I am very happy to.
Mr Ruffley: Thank you. No further questions.
Q119 Chair: How should I describe your first appearance before us? Bumpy at times, a very varied set of questions, and you can sense the importance that the Committee, as a whole, attaches to the work that the non-execs need to do in an institution such as the FCA, bearing in mind that many argue that they failed on the job. Even if they were talented and assiduous, still they failed in the run up to and during the early stages of this crisis. Perhaps the key thing to take away, I hope, from this exchange is that we want the non-execs to do a good part of the heavy lifting on our behalf, to keep an eye on what is going on in this organisation, in much the same way as a shareholder would expect their non-execs in a well run organisation to do the same, although they too have failed on the job in the past. I got the sense that that is exactly what you are intending to do, but if you want to make a final set of remarks to confirm that now, it would be certainly worth hearing.
John Griffith-Jones: Sure. I do see my number one job, in the short term, is to set up an effective board. I do have experience of what effective boards look like and we all, unfortunately, have experience of what ineffective boards lead to. There is no doubt that if we are going to have a board at all at the FCA, it needs to be effective in what it does. We have had a lot of discussion internally as to how to achieve that, I see it as my personal responsibility to make sure that that happens. We will be prepared to be judged on how we do in the future.
Chair: Okay. That is very helpful and we look forward to seeing more of you in the future and thank you for your evidence this morning.
John Griffith-Jones: Thank you.