UK markets watchdog, quizzed on approach, says doesn't 'shoot first'

* Lawmakers question FCA over insurance market review errors

* Head (Other OTC: HEDYY - news) says more aggressive approach part of FCA brief

* FCA banking risks outlook softened after industry complaints

By Huw Jones

LONDON, Jan 27 (Reuters) - Britain's financial markets watchdog does not "shoot first and ask questions later", its head said on Tuesday, responding to questions from lawmakers over its mishandling last March of the announcement of an insurance market review.

Financial Conduct Authority (FCA) chief executive Martin Wheatley said he now regretted using that phrase in 2012 to describe the way the FCA, which was launched in April 2013, would approach its brief.

But the legacy of the 2007-09 financial crisis meant the FCA made a conscious decision to take a more aggressive approach to regulatory issues than its predecessor, and this had has put it on the front foot in tackling abuses, Wheatley said.

The FCA was being questioned by parliament's Treasury Select Committee after its briefing of a journalist about the review caused a plunge in insurance company shares.

Wheatley and three other executives were stripped of their bonuses after an independent inquiry said in December the FCA mishandled the announcement, and was "seriously inadequate" in dealing with the ensuing market reaction.

The Committee on Tuesday accused the watchdog, supervisor for Europe's biggest financial market, of using the media to generate headlines as a "regulatory tool".

"We don't have a culture of shoot first, ask questions later," Wheatley said, who had used the phrase to signal a tougher regulatory approach was on the cards.

"It's absolutely not the culture of the regulator," Wheatley said. "I do regret the phrase. What I don't regret is that we try to be a regulator that is more on the front foot."

The FCA replaced the Financial Services Authority, whose failings contributed to the financial crisis that left British taxpayers having to bail out banks.

Wheatley said its more aggressive tone stemmed from being asked to act sooner to stop abuses.

The FCA has levied record fines on banks trying to rig currency and interest rate benchmarks, but lawmakers accused it of misusing the media.

"There is no objective ...to generate sensational headlines. That is not part of our culture. Generating coverage is different," Wheatley said. "Overall our communications strategy has been successful."

The FCA's Practitioner Panel complained to the watchdog's board last year that a draft of the watchdog's outlook on risks was too negative.

The outlook was "materially changed" before publication, FCA Chairman John Griffith-Jones told lawmakers. (editing by John Stonestreet)