It's been quite a journey for Sheldon Mills. He was raised by his grandmother in the Ely area of Cardiff, and where a teacher once told him to forget about aspiring to become a lawyer, to being at the heart of regulating the UK’s financial services sector.
The former pupil of Trelai Primary and Glyn Derw Comprehensive, is very much a champion of the interests of consumers at the Financial Conduct Authority (FCA) which he joined in 2018 and where for the last three years has held the role of executive director, consumers and competition.
The FCA, which employs 4,000, regulates the conduct of 50,000 financial services firms, and where Mr Mills said a focus for him has been trying to ensure that it has a deeper understanding of a wider number of communities, like Ely, to counter a danger of being seen as a sort of “Waitrose regulator”.
He also criticised unfair characterisation of Ely, where he mother and three brothers still live, in the aftermath of recent social unrest following the tragic death of two young teenagers.
Recalling the riots that engulfed the community when aged 12 back in 1991 he says like then, Ely still requires investment to ensure equality of opportunities afforded to those residing in more prosperous parts of the Welsh capital.
After taking inspiration from university prospectuses he would avidly read in the library of Glyn Derw, he realised his ambition of studying law at King’s College London.
His early career saw him specialising in antitrust and competition law at firms King & Wood Mallesons and Jones Day, before joining the Competition and Markets Authority, where he helped shape the new UK state aid regime.
Mr Mills, 47, said that the cost-of-living crisis has put significant strain on people’s finances.
The FCA recently published its Financial Lives Survey that showed in January around 300,000 people in Wales had missed bills or loan payments in at least three of the previous six months. This was an increase on the previous survey in May last year when it was 200,000.
The latest figure equates to 14% of people in Wales compared to 11% in the UK as a whole.
Mr Mills said: “That is a massive number of people when you take the entire population of Wales. It is pretty clear that on some statistics Wales is doing a tiny bit worse than the rest of the UK. For those on low incomes or benefits there are really serious impacts in terms of their abilities to support their day to day lives, whether that is being able to heat their homes during the winter or being able to feed their children all year round.”
With the collapse of a number of US banks, most notably Silicon Valley Bank (SVB) – whose UK operation was acquired by a £1 by HSBC in a deal engineered by the Treasury – following a run on deposits, there have been calls in the UK for the regulatory protection ceiling of £85,000 to be increased.
Mr Mills said: “In a sense it is a responsibility of those in charge of financial stability and the governor of the Bank of England has said they want to look at deposit insurance and whether it is at the right level given the collapse of SVB.
“You are always balancing how much protection you have in the system with how much risk you are going to have to allow finance to flow through markets. It is important to get that balance right.”
He said social media played a role in the run on deposits at SVB, as it has given people a platform to talk about issues at financial institutions. Mr Mills added: “Normally in the past if you think of large institutions with a significant place in the financial system, if there is a run on them that is going to cause financial instability and confidence issues. As financial regulators I think we do have to look as to whether that norm is the case moving forward as clearly where information flows as quickly as it does now digitally with 24-hours and social media you can see smaller institutions and regional ones like in the US causing problems within an economy.”
On whether the issue could be addressed by limiting the ability of consumers to take out deposits he said: “It is always a challenge and you have to look to the individual circumstance and how things are developing at the time, so I don’t think you can have a specific policy which says in these circumstances we will stop withdrawals.
" People think very carefully about these types of measures, as one of the main aims of us as regulators is to allow money to flow through systems and not to gum up systems. Also allowing money to flow is not just about speed and pace, it is the confidence in which firms and individuals can go about their daily lives. If you feel someone is going to block your account to do business then you may not buy or sell things. But in extreme circumstances the bank [Bank of England] will have a range of measures that it can introduce to ensure financial stability.”
Last week the FCA announced new rules that cryptocurrency firms must ensure that people have the appropriate knowledge and experience to invest in crypto. Those promoting crypto must also put in place clear risk warnings and ensure adverts are clear, fair and not misleading.
The new rules come into effect as research from the FCA estimates that crypto ownership in the UK has more than doubled from 2021 to 2022.
However, Mr Mills said people need to be cognisant that there is no safety net.
He added: “From a consumer protection perspective our message is you buy crypto at your own risk and if anything goes wrong you are not protected by the financial services compensation scheme and you cannot complain to the financial ombudsman service... you just lose your money. We currently regulate cryptocurrency firms for anti-money laundering [AML], so a crypto firm cannot provide products and services in this country unless they have got an AML licence.
“I sit on the UK Government’s crypto asset taskforce and the government is looking at bringing parts of both stable coins, which is more of a payment system, and digital assets etc, into our regulatory perimeter.
“The current proposal is that this would be done in stages and we are still working that through. I think that is probably a sensible way forward, as in one sense as we need to find a way to bring these firms into the regulatory system.”
Whether a compensation levy for crypto could be a future option he said: “One could consider that, but I think at the end of the day the compensation framework is there to support activity which we consider to be valuable activity for customers. So, if you put your money into a savings account, good, and into regulator investments and a pension.
If we know there are issues in terms of the inherent value for regular investment for individuals, and it is choppy with aspects of challenge in terms of the exchange and moving in and out etc, it is not necessarily appropriate for that to be covered.”
Despite advances in digital technology he says that cash remains important for many people. With high street lenders retreating from the high street, the FCA is looking to ensure there are alternatives, including new banking hubs from LINKS – the UK’s cash and access ATM network that is backed by the major lenders.
Mr Mills said: “We have been placing pressure on the banks, through LINK and others, that they are racing with these banking hubs.
“A banking hub isn’t necessarily for every community. Some individuals and small businesses might be comfortable with the Post Office or travelling to the nearest branch.
“But where there are applications from communities, and they can put forward evidence that they need a hub, then we want banks to move very quickly to get that alternative in place.
“There are other alternatives that we are asking banks to look at, like mobile banking that could particularly help rural communities, or even different types of societal infrastructure such as libraries in order to provide services to communities where they need it. And in Wales a lot of evidence shows that more people are reliant on cash on average than the rest of the UK.
“So, there is a need for cash, but I also think all of us need to recognise that increasingly things are moving digital and it is important for banks to help their customers learn how to use digital. If you are going to close all your branches, don’t just leave everyone high and dry. You need to get into those communities and help people to go on that transition. And if there is still a need for cash, these opportunities like banking hubs, mobile provision or going into community places, need to be there.”
On unscrupulous and illegal lending activity he said: “I understand why people might turn to that sort of provision. I have seen these people on the streets when I was a child so I know how it works.
“There is definitely a rise in illegal money lending and there has been through the pandemic and beyond. Our role is to try and ensure that access to affordable credit is there and is a market that is working. If you can get that right then for some part of this population they don’t need to turn to illegal money lenders.
Early life in Ely
On growing up in Ely, he said: “I had a good schooling, although I am public in saying one teacher didn’t see the talent there and was a bit down on me going to law school.”
But why would a teacher provide such a negative, even without foundation, prognosis?
Mr Mills said: “I think it was just about how people thought about people in Ely.”
Could there have been a racist overtone?
Mr Mills responded: “It wasn’t a race thing that I was aware of, but the two could have been working together.
“The way I see it, in Ely all the races come together. Yes, there can be disputes, but it is poverty and the challenge of making a living that brings everyone together.
“It transcends race as everyone is trying to make ends meet. There are a lot of working households in Ely, as there were when I was there.
“However, people have this suspicion that everyone is on benefits or is a scrounger and a criminal. That’s not my experience of Ely.
“Yes, there are people on benefits, but the majority are living in working households. The question is do they earn enough money to get by. They are not frivolous. When I was growing up, the first time I went on a plane I was aged 17 and I worked in Toy R Us to save up enough money to go on that plane because we couldn’t afford to go on holidays abroad. And I only left the country once when I was 13 to go on a school choir trip. My family really struggled [financially], however much that discounted cost was, to even get me on a coach to Stuttgart even though I was leading the choir.
“What is interesting in doing my job now, and thinking about consumer debt, is that I really understand what people have to do and some of the difficult choices they have to make. One of things I try to do is to ensure that we understand as many communities as we can when we do our work and to serve them the best we can, otherwise you end up becoming a Waitrose regulator.
“So, I do recognise when it comes to financial services it is not as easy for those communities to both understand and to get through the system and sometimes they end up with worse products than they need to.”
He recalled the social unrest that engulfed Ely in 1991.
He said:” I was around 12 or 13 and I do remember the riots going on for a number of days in Wilson Road, which was caused by the dispute over the price of bread.
“There was a racist component to those riots as it was an Asian shopkeeper and I remember vividly being out with my mates on the evening it started.
“We were hanging out at a bus stop, nowhere near the riots, and a police van pulled up and they started chatting to us and they were Scottish police that had been drafted in. I remember going home to my nan and telling her and I was grounded for the rest of the week, which made a lot of sense as some of the participation in those sorts of things is observer as opposed to active.”
On the recent unrest he said: “I think the current situation is not for me, but those professionals to look at.
“The only thing I would say personally is that two children have lost their lives. It is a close knit community and members of my family know one of the mothers and I just think the community is not a rioting community... it is one that looks after each other. Tempers had boiled over and there are things to be worked through, but what we should take from this is that it is a community that needs support and investment in education, youth services and sport etc, to ensure people there get the same opportunities that people in more prosperous areas of Cardiff are able to get.”
The UK Government, in a move being positioned as a benefit from Brexit, is looking to get UK pension funds and insurers investing more into infrastructure and companies.
Dubbed the Edinburgh Reforms, the Westminster administration said a reform of Solvency II rules would reduce the capital buffer levels required by insurance firms – allowing them to invest more in the UK economy.
The UK Government is also seeking to reduce regulations around floating on exchanges in London.
Mr Mills said: “In a post-Brexit environment we have a job to do at the FCA and so does the PRA (Prudential Regulatory Authority) to translate the retained EU law into UK law and there are number of what we call files that we need to shift into UK law and a number of policy decisions and opportunities that you have that flow from that.
“What flows from that is the ability, potentially, to think about the UK economy and what it might need in terms of some of the balances that you see in pensions.
“The asset management industry, or parts of it, and likewise the life and insurance industry, has called on the government to think about whether or not there could be less restrictions on the amount of capital needed to be held and whether that could flow into more productive finance for the economy.
“Solvency II is the for the Bank of England, but from an FCA and consumer perspective, what we would look to see is the balance of benefits both for growth, competition and injection of capital into the economy, which is needed as it is quite clear that growth has stagnated in the economy over the past couple of years. So, there is some need for capital flow. We are looking at that through a whole host of measures within the FCA.”
This includes listings with the FCA looking at reducing some of the rules such as required shareholder approvals.
Mr Mills said: “We are consulting on whether we can make the listing regime more efficient and effective which might drive more interest in listing here, but also which can find ways so that venture capital might use public markets to raise money more. The matter for unlocking that capital is for government and potentially the PRA. Our job, whatever system is put in place, is that the principles around transparency, disclosure and consumer understanding are there.”
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