What are the FCA’s strategic themes?
In a departure from its usual three-year strategy, the FCA has released a bold, longer-term five-year strategy.
Over this period, the FCA intends to focus on four key priorities:
Be a smarter regulator - predictable, purposeful and proportionate. The FCA will improve its processes and embrace technology to become more efficient and effective.
Support sustained economic growth – by enabling investment, innovation and ensuring the continued competitiveness of the UK’s world-leading financial services.
Help consumers – to navigate their financial lives by working with the wider industry to boost trust, product innovation and ensure the right information and support is available for people to take informed financial decisions.
Fight financial crime – by focusing on those who seek to do harm. The strategy will go further to disrupt criminals and support firms to be an effective line of defence.
What are the areas of focus?
By way of extension to its previous strategy, the FCA is focused on supporting economic growth and innovation. Consumer protection and enhancing trust in financial services remains a central area of focus for the regulator and the fight against financial crime continues to be a high priority.
Underlining this, the new strategy represents a conscious and deliberate rebalancing of risk, in support of the Government's growth agenda to whom the FCA is accountable. In respect of this balancing act and the need for an informed assessment of risk, regulators are initiating an open debate across the industry and with government, putting their long-standing response to the previous financial crisis well and truly behind us.
The new strategy places a stronger emphasis on becoming a smarter regulator, by leveraging technology and improving processes to be more efficient in delivering focused and proportionate financial services regulation. This will inevitably require some element of risk-taking.
The consolidation of the Payment Systems Regulator (PSR) into the FCA is a significant development aimed at reducing regulatory complexity and boosting economic growth. The UK Prime Minister announced this plan as part of a broader effort to streamline regulators and create a more efficient environment for businesses.
There is a more explicit societal focus in helping consumers navigate their financial lives and make informed decisions. For example, the new strategy includes specific commitments to support consumers in accessing home ownership. It recognises that stringent mortgage affordability requirements may have made it harder for people to get on the property ladder, despite consumers’ ability to afford comparable rental payments.
How will they achieve this new strategy?
The FCA has signalled how it will enact this strategy and what the impact on the firms it regulates might be, including:
Becoming a smarter regulator: The FCA intends to adapt how it will regulate and supervise firms. Notably, it will adopt a more flexible approach, including less intensive supervision for those firms demonstrably seeking to 'do the right thing'. With enforcement, there will be greater focus and pace across a smaller number of cases, in response to certain previous criticisms.
In addition, the FCA plans to improve its processes and embrace technology to become more efficient and effective. In summary, it will:
- streamline the authorisation process for start-up firms
- enhance the collection and use of data, and
- leverage digital innovation to improve regulatory efficiency.
This might prompt firms to reassess their data management practices and whether data management tools can be leveraged to better meet regulatory requirements more effectively. Firms should be ready to adapt to changes in reporting and communication with the FCA. This includes ensuring that their reporting systems are up-to-date and capable of meeting the new requirements.
Supporting sustained economic growth: The FCA aims to enable investment, foster innovation and ensure the continued international competitiveness of the UK's financial services. This will involve:
- reforming the Listing Rules
- bolstering investment research
- revolutionising financial advice provision
- launching long-term asset funds.
In response, firms might choose to actively participate in initiatives that support economic growth and innovation. This includes exploring new investment opportunities and fostering innovation within their organisations. Many firms may take the new FCA strategy as an implicit signal to innovate with confidence and reassess their attitude to risk.
Helping consumers navigate their financial lives: The FCA will work with the industry to boost trust, encourage product innovation, and ensure that the right information and support are available for people to make informed financial decisions. This will include:
- improving credit information
- reforming online tools explaining pensions
- simplifying rules for mortgage guidance.
In keeping with the drive for simplification in its rules, the FCA has also simultaneously published a feedback statement on the Consumer Duty which includes an ambitious and wide-ranging programme of action.
The new strategy is clear that firms should continue to focus on improving transparency and providing better support to consumers. This involves simplifying communication, offering clear and accessible information, and ensuring that consumers can make informed financial decisions.
Fighting financial crime: The FCA will focus on disrupting criminals and supporting firms to be an effective line of defence against financial crime. This will include:
- financial crime prosecutions
- supporting firms in implementing effective anti-financial crime measures.
In parallel with this priority, firms need to bolster their defences against financial crime by ensuring they have robust anti-financial crime measures. This includes staying updated with the latest regulations and ensuring that their systems and processes are capable of effectively detecting and preventing financial crime.
In summary, the FCA’s new five-year strategy establishes a bold and ambitious long-term trajectory as it seeks to rebalance its approach to risk, whilst remaining committed to its primary objectives as an efficient and effective regulator.
To learn more about the FCA’s five-year strategy means for you, contact David Morrey, Paul Staples or Alison Crotch-Harvey.
