Tracey McDermott to leave Financial Conduct Authority

The acting head of the UK’s financial watchdog will leave the agency after a leadership crisis — and its wider fallout — came to an end last week.

Tracey McDermott, who has been chief executive of the Financial Conduct Authority on an acting basis since September, said on Wednesday she would leave once Andrew Bailey was in the post in July.

Ms McDermott, a litigator by training who has been with the regulator since 2001, must serve a six-month period of gardening leave before taking up any new position but has made no plans beyond that, said people familiar with the matter.

She was thrust into the acting position after George Osborne, the chancellor, defenestrated Martin Wheatley, the former FCA boss, last year after the Conservative victory at the general election.

The question of who would lead the FCA came amid a wider debate about the right level of regulation. Backbenchers and opposition politicians have expressed concerns that the FCA and the Prudential Regulation Authority had rowed back on tough post-crisis reform in the wake of the Tory win. At the time, HSBC and Standard Chartered were threatening to move their headquarters out of the UK partly because of the tough regulatory environment — plans they have since scrapped.

Mr Wheatley had presided over an era of record penalties following the Libor and foreign exchange rigging scandals, for which banks paid the FCA alone £2bn. An episode in which the FCA botched a press briefing that led to shares in insurers plummeting in 2014 also did not please Mr Osborne.

The FCA has suffered from low morale since Mr Wheatley’s departure: a survey conducted in October revealed half the staff were dissatisfied with its leadership. It also showed a high turnover rate. Ms McDermott is the latest in a series of senior figures to have left the FCA in recent months.

John Griffith-Jones, the FCA chairman, said: “Tracey has done a terrific job leading the FCA over the last seven months, building on the enormous contribution she has made in her various roles over the previous 15 years.

“Transitions are always challenging and her energy and clarity of purpose have been invaluable in steering the organisation in the right direction.”

Admired for her attention to detail by both her staff and the industry, Ms McDermott was thought to be the leading internal candidate to permanently replace Mr Wheatley. Previously the head of supervision and enforcement, she was in charge of the teams that probed banks and brokerages as part of the Libor and forex investigations. She was then the “only capable pair of hands” to head the supervision team in the wake of the pre-briefing fiasco.

But Mr Osborne unexpectedly announced her withdrawal from the global leadership race on the radio in January. He eventually confirmed that Mr Bailey, who heads the PRA, the sister regulator, would move over to lead the FCA. People close to Ms McDermott said at the time that she was likely to leave the agency as a result.

In turn, Mr Bailey’s replacement at the PRA was named last week as Sam Woods, head of insurance. This cemented Mr Bailey’s start date at the FCA, giving Ms McDermott the chance to leave. She had previously said she would continue as acting CEO until a permanent successor was in place.

Tim Dolan, a regulatory lawyer at King & Wood Mallesons, said: “It is a shame that the FCA board were not able to persuade Tracey to stay on and were not able to create a suitable role for her.

“Andrew Bailey will be taking the helm of an organisation in July which is dealing with a vast range of different challenges and she would have been the ideal person to have supported him.”