(Bloomberg) — The UK’s top financial watchdog has promised a “less intensive approach” to firms whose intentions are pure, signaling a more pragmatic stance in a new five-year strategy that leans heavily into the government’s growth agenda.
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The Financial Conduct Authority, responsible for supervising some 42,000 firms, is trying to cut back on excessive form-filling and other hurdles that the industry says makes the UK a less attractive market.
The Labour government has vowed to take decisive action if any regulators are found to be holding back the growth that it’s depending on to restore the public finances. It’s already set out plans to scrap the Payment Systems Regulator.
The FCA said on Tuesday that it would become a “more efficient” supervisor, including “taking a less intensive approach for those firms seeking to do the right thing, significantly streamlining how it sets its supervisory priorities, and reviewing whether it can stop requiring certain data returns.”
Chief Executive Officer Nikhil Rathi said the FCA remained anchored to its main objective to preserve financial stability, but saw scope to be more pragmatic and predictable for businesses.
“One or two more things may go wrong, and we’re not going to be able to stop everything, but that might be a price worth paying for the broader benefit to society,” he told lawmakers on the Treasury Select Committee on Tuesday. “We will always be holding industry’s feet to the fire, specific firms’ feet to the fire, where we see issues.”
He said the FCA was already reducing the regulatory burden, such as no longer requiring consumer duty champions on every company board and consulting about changing the £100 limit on contactless payments.
“Some of the proposals that we did have on our grid for this year around additional capital for investment firms, we are going to wait to see how some of the consumer duty is bedding in, some of our work on ongoing advice settles, before moving forward,” he said.
Ashley Alder, the regulator’s chair, said the strategy reflected the FCA’s desire to “deepen trust in financial services and shift our collective attitude across financial services to risk.” The agency’s measures for success include an increase in the proportion of people holding “mainstream investments” by 2030.
The FCA also hopes its strategy will slow the growth in authorized push payment fraud and investment fraud in the coming years. It also vowed to continue the agency’s digital transformation and its work on speeding up the process for authorizing applications, a persistent bugbear for executives.
“What is really required is a much more radical approach to not just tinkering with a few hundred pages of guidance but actually rethinking (with Treasury) which financial services activities are regulated; for what purpose and at what cost,” said Tim Dolan, a financial regulatory partner at the law firm Greenberg Traurig. He praised the FCA for guaranteeing that more regulated firms would have a contact point, and its plans to establish a presence in the US and Asia Pacific to support firms looking to do business in the UK.
Alder’s term runs until February 2028, taking him to the strategy’s midpoint. Rathi is due to complete his five year contract this October and has declined to speculate on his plans after that point.
The FCA’s strategy announcement came the day after it told British finance firms that they can stop following more than 100 pages of outdated guidance on products such as mortgages and investments.
The watchdog said it will also sweep away hundreds of historical supervisory publications to help clarify how companies should meet the controversial consumer duty it imposed in 2023, which bound financial institutions to ensure they were delivering good outcomes for clients.
“Now the consumer duty is in full force we’re making changes quickly where stakeholders want us to, to cut unnecessary costs, support growth, and ultimately help consumers get better outcomes,” Sarah Pritchard, executive director of competition, consumers and international, said in a statement.
Rathi said earlier this month the UK’s regulators could “walk the line” of giving government what they want while safeguarding consumers and financial stability. His regulator and the Prudential Regulation Authority have both dropped proposals to boost diversity in the financial industry.
(Updates with CEO comments, lawyer reaction from fifth paragraph.)
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