FSA's Martin Weatley 'shocked' by Libor and interest rate mis-selling scandals "The Libor case and indeed the interest rates swaps cases, many of them emanate from a period between 2005 and 2008, which seems to be a period where ethical standards were set aside and what we are dealing with now is the legacy of that," he says. In truth, I am shocked by how far standards had slipped. Wheatley refers to this as his "back book legacy" and it is clearing this up that is very much at the forefront of his mind. [Banks] were selling products that were profitable for the investment banks, not well understood by the banking staff that were introducing them, and not at all understood by the customers who were buying them. I do think that is an abuse," he says, adding that were are now unfortunate to be living through the period in which that abuse is cleared up. Part of that process has involved injecting what he describes as a "different philosophy" into his division as it prepares to become an entirely separate new regulator that will be called the Financial Conduct Authority (FCA). "We've got to be much more open to taking in intelligence and data and whistleblowers, so not just the formal regulatory reported data from firms," says Wheatley, even going as far as to suggest that FCA staff should be studying social networking sites such as Twitter for potential financial scandals. One of the things you have to realise is we are in a transition phase as an organisation, so I know we will continue as the FSA for probably another nine months, but actually internally we are effectively operating as the FCA. Though he is careful to avoid direct criticism of the current organisation, Wheatley makes a pointed reference to the "conflicting objectives" of the FSA, which was expected to ensure the financial soundness of the banking system as well as acting as its policeman. "We won't be having to compromise our views based on whether the bank is likely to be prudentially sound," he says. That is a completely different focus from saying we've got to make sure banks look after their customers fairly. In a sense, I wouldn't say that the FSA got it wrong, but it just had a different set of conflicting objectives. For Wheatley, who until last year had spent seven years at Hong Kong's highly-regarded financial regulator, the key thing is culture. It is clear that he views with horror the revelations that have emerged about Barclays in recent days and is determined to make sure they are not repeated. On the other hand, he is also a realist and recognises that in such large businesses there will be always be some sort of wrongdoing. "Any organisation you're going to find some emails you'd rather not see," he says. I'm sure there will be within banks email statements that are embarrassing - that's a fact of life. What we are concerned about and what we are doing further work on are the incentive structures within banks that actually created an atmosphere of selling particular types of products. Wheatley adds that he has "genuine sympathy" for the small businessmen sold inappropriate swaps by banks, but that he is not prepared to make the next leap and say every firm was mis-sold the products. Remember there were, over this period, about 28,000 contracts sold and within that population there are clearly going to be some mis-sales and very difficult stories. What we have been careful to do is not view all 28,000 through the same lens. Such a view may seem overly balanced for the potentially thousands of small and medium-sized business that have been hit with hundreds and in some cases millions of pounds in extra costs they say their lenders never warned them about. However, Wheatley does not mean to suggest he is does not care about their predicament. The important thing for us is that everyone is desperate to get the economy moving. Everybody is desperate that SMEs are able to expand and grow their businesses," he says. We don't want in this process to stifle the supply of credit to small businesses. What we want to do is help those businesses that have found themselves in the wrong product.