FCA commits to being a more innovative, assertive and adaptive regulator

FCA commits to being a more innovative, assertive and adaptive regulator

The Financial Conduct Authority (FCA) has today made a commitment to be a more, innovative, adaptive and assertive regulator.

The commitment reflects the FCA’s Business Plan for 2021/22, the first annual plan since Nikhil Rathi joined the FCA as chief executive in October 2020.

Nikhil Rathi said: “The FCA must continue to become a forward-looking, proactive regulator. One that is tough, assertive, confident, decisive, agile. One that acts, acts fast—and where we can’t act, engages enthusiastically with those who can.

“Continuing to be more innovative, assertive and adaptive.”

In a statement on its role, the FCA said it will be accountable for its progress on:

  • Setting the bar high to support market integrity and sustainable innovation, ensuring firms start with high standards and maintain them
  • Using new approaches to find issues and harm faster; £120m will be invested in the data strategy over the next 3 years
  • Tackling misconduct to maintain trust and integrity, being proactive at the boundaries of the perimeter
  • Enabling consumers to make informed financial decisions
  • Investing in our people, reshaping our culture and working with others so we achieve more.

Nikhil Rathi added: “Over the next 18 months you will continue to see an FCA that looks and feels even more different. One that operates differently, partners differently, and communicates differently.

“One that delivers market integrity and delivers for the consumers that we serve. One that is not only purposeful but that is fit for purpose. There is a lot of work to do. And I am confident that we have the right strategy, the right people and the right ambition to do it.”

The Business Plan sets out the key areas of focus for the FCA in the coming year.

In consumer markets priorities include:

  • Strengthening rules on financial promotions to protect consumers in relation to investments
  • Continuing to improve standards of pension advice
  • A consumer campaign on scams and high-risk investments
  • Progressing proposals for a new Consumer Duty to raise standards in firms’ treatment of consumers.

In wholesale markets the focus includes:

  • Following the UK’s exit from the EU, continuing to develop plans to make primary and secondary markets work better while maintaining high standards
  • Continuing to support the smooth transition away from sterling LIBOR to alternative risk-free rates.

The FCA will also be consulting on changing the balance between decisions taken by the FCA executive and the Regulatory Decisions Committee, which is a sub-committee of the Board.

The proposed changes aim to streamline decision making on authorisation applications and specific supervisory and enforcement decisions.

The Business Plan commits the FCA to becoming a regulator for the whole of the UK. At present the FCA has offices in London and Edinburgh.

It is exploring opening an office in Leeds with at least 100 staff based there in the first phase; doubling headcount in Edinburgh to over 200 over the next 2 years; and establishing a presence in Belfast and Cardiff for the first time by the end of the year.

Andrew Strange, financial services regulation insights director at PwC, commented: “The FCA’s new business plan unveils a new era of regulation for financial services firms that is intent on building a greener, more diverse industry that works better for consumers. While headline regulatory priorities remain broadly consistent, it marks a departure from its previous approaches in both themes and tone.

“The FCA is clearly committed to the wider agenda of competitiveness in a post-Brexit, post-pandemic world. But the accompanying narrative of the regulator is more assertive than firms are used to. Pushing boundaries and testing the limits of its sanctions powers suggests a level of intrusion that may be uncomfortable for some firms, but will be welcomed by good market participants. Modernising its use of data and technology will allow the FCA to be more agile, but will require investment by firms in their own data capabilities.

“The big change in priorities is the transition away from long laundry lists of regulatory initiatives. Instead the FCA is driving new ‘real life’ themes which really matter to firms and consumers alike - diversity and inclusion, building a green and sustainable future, and ensuring international cooperation. The last business plan did not reference ESG or diversity once. That is a huge and welcome modernisation of its approach.

“Consumers will also welcome this. We’ve seen the FCA proactively challenging firms for the benefit of consumers in recent times, and today’s business plan underlines a continuation and ramping up of these efforts.”

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