We are committed to being clear about how we are accountable for our progress. On this page we set out what outcomes matter to us and the metrics we will use to measure them and our progress against these metrics.
1. Introduction
Through our 3-year Strategy and our annual Business Plan, we are making ourselves more accountable by creating a clear thread from the outcomes we are seeking to achieve for consumers and market participants, to the tools and interventions we are deploying as a result of the activities we are undertaking.
1.1. Outcomes and metrics
Our Strategy sets out how we will deliver our statutory objectives by focusing on reducing and preventing serious harm, setting and testing higher standards, and promoting competition and positive change. Our Strategy sets out our commitments to support these 3 focus areas, joining up our tools across sectors to deliver measurable outcomes, which we describe in more detail in our annual Business Plan.
In our Strategy we distinguish between 2 levels of outcomes:
- Consistent topline outcomes we expect financial services markets to deliver - these stay the same from year to year and enable us to measure how we deliver our statutory objectives over time. On these pages we set out the topline outcomes and metrics for Consumers and Wholesale markets.
- Our commitment outcomes, which we set over a 3-year period and review each year - we have 13 commitments that explain how we are joining up our actions to help create the conditions for financial services to deliver the outcomes we expect. We have included our metrics related to our commitments and have linked these to our topline themes.
These metrics will be developed and updated as we enhance our understanding of how best to measure the outcomes we have set, and if we need to reprioritise based on changing economic conditions. In 2021 we also set out 7 strategic transformation-linked outcomes and metrics as part of our Business Plan 2021/22 and we report on these below. We have incorporated some of these transformation outcomes and metrics into the consistent topline outcomes or into our commitment outcomes.
View accessible version of infographic (PDF)
We have identified metrics for each of our outcomes and have 3 types:
- metrics based on research data that record the attitudes, perceptions or behaviours of consumers or firms (in particular, our Financial Lives survey (FLS) and the FCA and Practitioner Panel survey)
- metrics that best provide market data that measure or are indicative of the outcome
- metrics based on our data that record FCA activities that help us to achieve the outcome
All metrics have limitations, especially in the context of dealing with complex and inter-related financial services outcomes, and we have set out some considerations for interpretation in the further detail for individual metrics. Progress will not be immediate and will not be steady from year to year. The movement of a metric is often affected by what other metrics, and other parties, are doing. We also need to consider how metrics may be affected by economic uncertainty or other factors beyond our control. We include baselines and will use these to assess how outcomes are progressing. We include our intended direction of change for the metric - increase or decrease - over the long-term (unless otherwise specified), all things being equal.
But we recognise that a proper assessment of the reasons behind any changes in value is key to understanding whether an increase or decrease should be regarded as consistent with our stated outcomes. For example, a short-term jump in complaints or compensation claims may be driven by better consumer awareness of their rights or may reflect our adoption of new approaches to identify harm faster. It can take some time for effects to flow through because the data can lag behind misconduct. Over time, however, we might expect the numbers to fall as firm conduct improves and there is less cause for complaint or a claim.
In some cases we indicate that a metric is under development. This will be where we are working to create a new metric, we plan to source new data or make other significant improvements to the existing metric. We will keep all metrics under review and consider whether they remain appropriate for the outcomes we are seeking to achieve or whether they should evolve or be replaced. We will continue to engage with stakeholders and partners so we can improve the way we measure outcomes. We welcome your views on the metrics and data we set out on these pages at [email protected].
1.2. Measuring progress against our metrics
We have committed to report annually on these metrics and these pages include our progress against each metric during the first year of our 3-year Strategy.
This is the first time we’ve reported against these metrics and we recognise it will take time to see the full impact of all our interventions. The outcomes we want to see may also be affected by the actions of other parties, as well as the external environment, including economic uncertainty or cost-of-living challenges. Setting and measuring progress against these outcomes, however, has enabled us to be clear about what we want to achieve and the action we are taking to get there.
Our metrics show that we’ve made progress in 2022/23 against our outcomes for dealing with problem firms, enabling consumers to help themselves and improving the oversight of Appointed Representatives commitments. We are also seeing a slowdown in the growth of fraud, but it is unclear what is driving this. Despite the challenging economic environment, we have generally not seen a meaningful worsening in some of the metrics where we might have expected to see a decline.
As we better understand the current metrics and how they are affected by wider economic shocks, we will consider including targets that we are aiming to reach. Monitoring these metrics will be one of the sources of evidence that inform the actions we take.
More information on the data sources in relation to specific topline and transformation-linked metrics is available in the Further Detail links for each metric. We expect to broaden these key data sources over time.
1.3. Causal chains and benefits
We use our regulatory tools and interventions to deliver our regulatory strategy. These range from policy interventions (through new rules and guidance) to enforcement or supervisory action. We are enhancing the way in which we measure the effectiveness of our tools and interventions in delivering our stated outcomes.
We estimate that we delivered at least £17 of benefits for every pound spent on running the FCA, for a subset of our policy and enforcement activities undertaken over the 3 financial years to March 2022.
We will continue to improve and develop this analysis, for example by including more of our tools and interventions. See our Positive Impact 2023 paper for an explanation of what these figures mean and how they are estimated.
We have started to explain how we expect our tools and interventions to deliver their end outcomes using causal chains and to identify specific metrics to monitor. We have an established impact evaluation programme which we will further develop so we can examine the impact of our work in more detail and get better at choosing the right intervention.
1.4. Activities with cost
Our activities cover the work we do that allows the tools and interventions to be deployed. We set out key operational metrics among the metrics we have identified for our commitments. We also have Operating service metrics in place which helps us understand where we do well and where we can improve.
2. Our topline outcomes and metrics
There are 4 consistent topline themes we expect from financial services, which cut across the markets and sectors we regulate – fair value, suitability and treatment, confidence, and access.
We use these 4 themes to help us define consistent topline outcomes for consumers and wholesale markets.
We have established metrics as an indicator of progress against our topline outcomes for consumers and for wholesale markets.
For each metric we set out our intended direction of travel, the baseline value, latest value, the source, and brief explanatory text.
We also provide further detail about the data, how the metric is calculated, some points to consider when interpreting the numbers and, where relevant, previous values, potential improvements, as well as links to related material.
2.1. Consumer topline outcomes and metrics
The following metrics indicate our progress against our Consumer outcomes for fair value, suitability and treatment, confidence and access.
When interpreting the latest metric values, it is important to recognise that progress may take time to reflect or may not be steady from year to year. Metrics may also be affected by the activities of other parties such as the Government, as well as by the external environment, for example economic drivers or the recent impact of cost-of-living pressures.
In our Annual Report, we set out further details of the actions we have taken in 2022-23 which, along with the activities in our 2023/24 Business Plan, we expect to contribute in time to progress against these outcomes.
Fair value
What the latest metric values tell us
We have seen a slight increase in the proportion of consumers stating that they had been offered a product or service they wanted in the last 2 years, at a price or with terms and conditions they felt were ‘completely unreasonable’ when surveyed in May 2022 (metric CFV1-M01).
This may have been influenced by various factors, including cost-of-living increases and pressures and resulting perceptions of fair value. We expect the Consumer Duty to set higher standard of care that firms must provide to retail customers. This includes delivering good outcomes in relation to price and value.
In our latest Positive Impact 2022 analysis (CFV1-M02) we have estimated the annual average benefits for consumers and SMEs from a subset of the rules we introduced between April 2019 and March 2022 was at least £9.6 billion. We have also identified average annual benefits due to our enforcement of nearly £0.5 billion, resulting from direct consumer redress, as well as confiscations and penalties imposed.
The benefits from our latest analysis total an annual quantified positive impact of £17 for every pound spent on running the FCA. Even though we have taken a 3-year average, the total benefits will still vary over time as the number and type of interventions and the extent of their impacts will vary from year to year and larger policies fall in or out of the timeframe. While this year’s estimates do not appear to be negatively affected by the pandemic and economic downturn, it is possible the impact estimates we produce over the next few years will be affected. This is because the number of policies we introduced in the financial year 2020/2021 was lower than that in pre-pandemic periods. We take into account all benefits that are quantified in our published CBAs for all policies whose Policy Statement we published in the 3-year period to March 2022.
Recent interventions contributing to these benefits, include our recent consumer market interventions into General Insurance and Claims Management Companies. These interventions are just some of the actions we have taken to make sure consumers receive fair prices and quality from financial services.
For further details, see also the outcomes and metrics for our Putting consumers’ needs first commitment.
Outcome: Consumers receive fair prices and quality
We measure this with 2 metrics:
Metric CFV1-M01: Reduction in the proportion of consumers who, in the last 2 years, have been offered a financial product or service they wanted, but at a price, or with terms and conditions, they felt to be ‘completely unreasonable’
This Financial Lives survey (FLS) metric measures whether consumers perceive they are receiving fair prices and/or quality based on a ’completely unreasonable’ perception. Note that ‘completely unreasonable’ is used for the purposes of questionnaire design and doesn’t represent a threshold as to what we perceive fair value to be.
Baseline value: 7% of consumers (2020)
Latest value: 10% of consumers (2022)
Difference between 2020 and 2022 is statistically significant.
Source: FCA FLS
Metric CFV1-M02: Increase in aggregate benefits from our policy work
The metric provides an indicator of the estimated value of the benefits that result from a subset of our policies. Most of these estimated benefits are for consumers and SMEs.
Baseline value: at least £6.9 billion in benefits (3-year annual average, April 2018-March 2021)
Latest value: at least £9.6 billion in benefits (3-year annual average, April 2019-March 2022)
Source: FCA analysis of past Cost Benefit Analyses
Suitability & treatment
What the latest metric values tell us
Consumers’ satisfaction with their providers remained steady when surveyed in May 2022 (Metric CST1-M01), though the average proportion of upheld Financial Ombudsman Service complaints for recent events about unsuitable advice or mis-sold products and services decreased (metric CST1-M02).
While it is too early to identify from the data if this is a consistent trend, this reduction could have been influenced by our historical interventions requiring firms to compensate consumers for mis-selling of PPI, with firms less likely to mis-sell as a result.
Together with our increased interventions to tackle mis-leading or unclear financial promotions, we anticipate the Consumer Duty will positively influence both these figures in time, as the Duty comes into effect and is embedded at each stage of the retail customer journey.
For further details, see also the outcomes and metrics for our Putting consumers’ needs first commitment.
Outcome: Consumers are sold suitable products and services and receive good treatment
We measure this with 2 metrics:
Metric CST1-M01: Increase in consumer satisfaction with their providers
This FLS metric provides an indicator of the degree of consumers’ satisfaction with their own providers in the financial services industry.
Baseline value: 7.8 out of 10 - composite index showing consumers' overall satisfaction with their providers (2020)
Latest value: Latest value: 7.8 out of 10 - composite index showing consumers' overall satisfaction with their providers (2022)
Source: FCA FLS
Metric CST1-M02: Reduction over time in upheld Financial Ombudsman Service complaints about unsuitable advice or mis-sold products and services
We use complaints data to help assess the treatment of customers by firms and to highlight potential concerns such as a lack of product or service suitability or issues with specific firms. We monitor complaints including and excluding Payment Protection Insurance (PPI) and also those with recent event dates – where the event that caused the complaint was during 2020, 2021 or 2022.
Baseline value:
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Confidence
What the latest metric values tell us
Overall, consumers’ confidence in the financial services industry, when surveyed in May 2022, remained steady when compared to 2020 (metric CCO1-M01). But there was a decline among vulnerable consumers.
This may be influenced by cost-of-living increases, with vulnerable consumers who are typically less confident and likely to be further and more adversely impacted by cost-of-living pressures. We anticipate the Consumer Duty, as well as our work to make sure firms are supporting retail customers to sustainably manage their debts, will help to positively influence confidence over time.
While there were fewer victims of investment fraud in 2022 compared with 2021 (3.5% fewer), the value of losses was up by 6.8%. However, this increase in losses is considerably less than the increase reported between 2020 and 2021 when there was a 53% increase.
Authorised Push Payment (APP) losses also reduced in 2022 compared to 2021 by 17%, but cases increased by 6% (metrics CC03-M03 and M04).
It is not clear what is driving the current slowing down of growth in fraud rates as there are wide-ranging drivers of different types of fraud and an array of parties who can affect its prevalence and impact on victims.
We’ve continued to work with partners on legislative and regulatory changes to help banks protect consumers from APP fraud. We expect the forthcoming changes to incentivise firms to invest in enhancing their fraud controls and we are working closely with firms to prevent fraud.
But it remains challenging for the financial services industry alone to prevent fraud. This is because fraudsters are becoming more sophisticated in their methods of deception. They are bypassing the banks’ advanced technologies by using social engineering techniques via online platforms or telephone contact. A whole system response is needed to affect overall APP rates.
Another focus of our work to improve confidence is making sure consumers have appropriate access to redress when things have gone wrong, importantly with the firm that is liable taking appropriate responsibility resulting in less demand on the Financial Services Compensation Scheme (FSCS).
The latest data from the FSCS shows that while the number of new claims decreased in 2021/22 compared to 2020/21, the number of payments made increased. The overall amount of compensation paid remained steady (metric CC2-M01).The amount of levy charged to firms is expected to fall for 2022/23. However, FSCS costs include payments for past misconduct that happened 5-10 years ago, we know that there are still existing liabilities in the pipeline.
For further details, see also the outcomes and metrics for our Reducing and preventing financial crime, Enabling consumers to help themselves, Improving the redress framework, Reducing harm from firm failure and Putting consumers’ needs first commitments.
Outcome: Consumers have strong confidence and levels of participation in markets, in particular through (1) minimised harm when firms fail and (2) minimised financial crime
We measure this with 1 metric, underpinned by measures of minimised harm when firms fail and minimised financial crime:
Metric CCO1-M01: Increase in the proportion of consumers who have confidence in the UK financial services industry
This FLS metric provides an indicator of the level of consumer confidence in the UK financial services industry.
Baseline value: 41% of consumers (2020) (35% vulnerable consumers, 47% not vulnerable consumers)
Latest value: 41% of consumers (2022) (33% vulnerable consumers, 49% not vulnerable consumers)
Source: FCA FLS
Outcome: ... (1) minimised harm when firms fail
We measure this with 2 inter-linked metrics because these measures need to be considered together:
Metric CCO2-M01: Stabilise and then reduce over time Financial Services Compensation Scheme (FSCS) compensation, claims and payments
This metric provides a measure of the volume of claims and the volume and value of compensation payments to consumers as result of failures of financial firms which could impact consumer confidence in the financial system. This metric is heavily affected by economic conditions and needs to be considered alongside CC02-M02. It can take some time for effects to flow through to the FSCS because claims lag behind misconduct and ultimately firm failures.
Baseline value:
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Metric CCO2-M02: Monitoring the number of firm failures
This metric provides an indicator of the extent of firm failures occurring in the financial services market. Firm failures are a normal part of business, but can harm consumers, the effectiveness of markets, and overall confidence in the UK’s financial system. This metric will be heavily affected by wider economic circumstances. It needs to be considered alongside CCO2-M01.
Baseline value: 230 consumer firms (2021)
Latest value: 308 consumer firms (2022)
The baseline has been updated as a result of improvements we’ve made to our data process to improve accuracy.
Source: FCA data
Outcome: ... (2) minimised financial crime
We measure this with 5 metrics as there is not one single data source on crime and these metrics need to be considered together:
Metric CCO3-M01: Slow the fall in or increase the proportion of consumers who fully or partially recovered sums lost to scams
This FLS metric is a broad indicator of the extent to which consumers who lost money due to scams (such as push payment fraud or use of personal details, account or debit card without permission) and were able to recover it – which could impact their confidence in the financial system. The majority of the scams picked up by this metric are scams we have no or limited power to tackle as they are unrelated to financial products. This is the best metric we have available at this time and we will continue to consider more targeted ways of measuring this.
Baseline value: 79% of consumers with a day-to-day account who experienced a scam
Latest value: 75%* of consumers with a day-to-day account who experienced a scam
*Note, the latest value (75% - 2022) is not directly comparable with the baseline value (79% - 2020). Please see further details for more information.
Source: FCA FLS
Metric CCO3-M02: Increase in the proportion of Authorised Push Payment (APP) fraud losses that are reimbursed
This metric provides an indication of the proportion of APP fraud losses recovered. A higher level of recoveries will increase consumer confidence in the financial system.
Baseline value: 45.3% of total APP fraud losses reimbursed (2020)
Baseline updated to reflect the revised figure published by UK Finance
Latest value:
46.5% of total APP fraud losses reimbursed (2021)
59% of total APP fraud losses reimbursed (2022)
Source: UK Finance
Metrics CCO3-M03: Slow the growth in or reduce investment fraud victims and losses
This metric provides an indicator of the prevalence of investment fraud in the UK and is made up of the following typologies within NFIB data:
- pension liberation
- fraud recovery
- share sales / boiler room
- pyramid / ponzi schemes
- other financial investments
Higher cases and losses to this type of fraud will reduce consumer confidence in the financial system.
Baseline values:
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Between 2020 and 2021 there was 28% growth in reported victims and 53% growth in losses
Baseline has been updated to reflect revised figure published by NFIB
Between 2021 and 2022 there was a 3.5% reduction (ie negative growth) in reported victims and 6.8% growth in reported losses.
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Between 2020 and 2021 there was 27% growth in reported cases and 39% growth in reported losses.
Baseline updated to reflect revised figures published by UK Finance.
Between 2021 and 2022 there was a 6% growth in reported cases and 17% reduction in losses.
Metric CCO3-M05: Increase in proportion of applications rejected, withdrawn or refused by the FCA under Money Laundering Regulations (MLRs) or for financial crime reasons
This metric provides an indicator of the strength of our Gateway in minimising financial crime within the regulatory perimeter. This metric needs to be considered alongside CCO3-M03-M04 because if, over time, financial crime falls we would not expect to have a continuing increase in the number of applications rejected, withdrawn or refused. In time we may also see fewer unsuccessful applications if application quality improves.
Baseline value: 48 Annex 1 applications - (21%) were rejected, withdrawn or refused. 123 cryptoasset business applications (81%) were rejected, withdrawn or refused. This comprises all firms, across consumers and wholesale markets. (2021/22).
Baseline has been updated to financial year in line with data reported to HM Treasury
Latest value: 54 Annex 1 applications - (24%) were rejected, withdrawn or refused. 88 cryptoasset registration applications (93%) were rejected, withdrawn or refused. This comprises all firms, across consumers and wholesale markets. (2022/23)
Source: FCA data, MLR registrations currently reported to Treasury annually. This metric is the same as the topline metric for Wholesale markets Confidence – see Metric WCO2-M03
Access
What the latest metric values tell us
We want to make sure consumers’ needs are met through minimal disruption to firms’ services and low financial exclusion. Despite significant heightened threats last year such as cyber risks, slightly fewer operational disruptions were reported by consumer firms in 2022 compared to 2021 (metric CAC1-M01).
We expect this figure will be influenced in the future by both our work to strengthen the reporting regime and as firms continue to implement our new operational resilience requirements in time for 2025.
When surveyed in May 2022, a higher proportion of consumers who have been declined a product or service than in 2020 said that, in their view, they have been declined a product or service for this was due to non-financial reasons, such as age or health (metric CAC2-M01).
Overall, in relation to key products though (metric CAC2-M02), the proportion of consumers telling us they were without a day-to-day account was unchanged and more said they had private pension provision. However, fewer consumers said they held a general insurance product.
This may be influenced by consumers reducing spending on insurance products as a result of cost-of-living pressures. We will monitor future changes as part of our work to respond to cost-of-living increases.
For further details, see also the outcomes and metrics for our Minimising the impact of operational disruptions and Putting consumers’ needs first commitments.
Outcome: Diverse consumer needs are met through (1) high operational resilience and (2) low exclusion
We measure this with 3 metrics – 1 relating to operational resilience and 2 relating to low exclusion:
Metric CAC1-M01: Reduction in the number of operational incidents
Operational disruptions can cause wide-reaching harm to consumers and pose a risk to market integrity, threaten the viability of firms and cause instability in the financial system. Future work on the completeness and granularity of incident reporting is expected to improve this data.
Baseline value: 599 incidents – Consumer firms (2021)
Latest value: 588 incidents – Consumer firms (2022)
Source: FCA data
Metric CAC2-M01: Reduction in the proportion of consumers who were declined a product or service in the last 2 years, and, in their view, this was due to non-financial factors such as their age, health or ethnicity
This FLS metric is a measure of the extent to which consumers who have been denied access to a financial product or service think non-financial factors contributed to this. We use this perception as an indicator of the potential level of financial exclusion that, in some cases, may be caused by firms’ conduct.
Baseline value: 18% of those consumers who were declined a product or service (2020)
Latest value: 22% of those consumers who were declined a product or service (2022).
Difference between 2020 and 2022 data is statistically significant.
Source: FCA FLS
Metric CAC2-M02: Reduction in the proportion of consumers who do not hold certain key products
This FLS metric is a measure of the extent to which consumers do not hold certain key financial products (for example, general insurance) and is therefore an indicator of the potential level of financial exclusion that, among other things, might be caused by firms’ conduct.
Baseline value:
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Difference between 2020 and 2022 is statistically significant for general insurance and private pension provision.
2.2. Wholesale markets topline outcomes and metrics
The following metrics are indicators of our progress against our Wholesale markets outcomes for fair value, confidence and access.
When interpreting the latest metric values, it is important to recognise that progress may take time to reflect or may not be steady from year to year. Metrics may also be affected by the activities of other parties, as well as by the external environment, for example economic drivers, global market dynamics or market volatility.
In our Annual Report, we set out further details of the actions we have taken in 2022-23 which, along with the activities in our 2023/24 Business Plan, we expect to contribute in time to progress against these outcomes.
Fair value
What the latest metric values tell us
Overall, when surveyed in the latest 2022/23 FCA and Practitioner Panel survey, the proportion of firms confident that our oversight ensures financial markets function well remains high, though it has decreased compared to 2021 (metric WFV1-M01). This may be influenced by challenging economic and market dynamics, as well as critical media coverage during the survey period about companies deciding not to list in the UK.
Timely disclosures by listed companies are necessary to ensure transparency so market participants can make well-informed assessments of value and risks. We saw an increase in 2022, compared to 2021, in the number of market oversight enquiries we opened for potential failure of listed companies to disclose properly (metric WFV1-M02).
This increase may reflect greater reporting of potential disclosure failures to us, and our reaction to significant market events, but also other organisational factors relating to how we handle casework. Longer term, we aim for fewer oversight enquiries as we drive improved listed company compliance with standards resulting in fewer reported or detected potential disclosure failures.
For further details see also the outcomes and metrics for our Delivering assertive action on market abuse commitment.
Outcome: Market participants are able to make well informed assessments of value and risks due to appropriate transparency
We measure this with 2 metrics:
Metric WFV1-M01: Maintain the proportion of firms confident that the FCA’s oversight ensures relevant financial markets function well
The FCA’s delivery of our overall strategic objective will, to a significant extent, be met through market participants being able to make well informed assessments of value and risks due to appropriate transparency.
Baseline value: 93% - Wholesale markets firms (2021)
Latest value: 88% - Wholesale markets firms (2022/23)
Difference between 2021 and 2022/23 is statistically significant.
Source: FCA and Practitioner Panel survey
Metric WFV1-M02: Reduction in the number of FCA market oversight actions for potential failure of listed companies to disclose properly
This metric shows the number of enquiries initiated by the FCA’s Primary Market Oversight into possible failures by issuers to meet their market disclosure obligations. This metric is an indicator of the extent to which listed companies are being transparent in their declarations to the market.
Baseline value: 330 actions (2021)
Latest value: 391 actions (2022)
Source: FCA case management system
This metric is also one of our Delivering assertive action on market abuse commitment (Metric AMA3-M01).
Confidence
What the latest metric values tell us
The proportion of firms confident that our oversight protects and enhances the integrity of the UK financial system remains high, when surveyed in the latest 2022/23 FCA and Practitioner Panel survey, though it has decreased compared to 2021 (metric WCO2-M01). In addition to nickel market events from earlier in 2022, and subsequent regulatory action, confidence may have been influenced by high profile international bank failures during the survey period and consequent concerns around further market impacts.
To help ensure confidence, our oversight aims to make sure markets are resilient to such firm failures and are clean, with low levels of market abuse and financial crime.
The number of wholesale market firm failures has increased (metric WCO1-M01), while this number is higher than in 2021, it is similar to what we have seen in previous years. On market cleanliness, we saw an increase in abnormal price movements and anomalous trading volumes in 2022 compared with 2021 (metric WCO2-M02). Year-to-year changes may not reflect significant trends however. Episodes of high volatility, after the Russian invasion of Ukraine and other significant economic and political developments throughout the year, could have affected our 2022 measures. The increasing trend we have seen of forced announcements following media speculation may also have adversely affected 2022’s data. (For more information see our market cleanliness statistics).
For further details, see also the outcomes and metrics for our Delivering assertive action on market abuse commitment and Reducing harm from firm failure commitments.
Outcome: Markets are (1) resilient to firm failures and (2) clean with low levels of market abuse, financial crime and regulatory misconduct
We measure this with 4 metrics – 1 relating to firm failures and 3 relating to market abuse, financial crime and regulatory misconduct:
Metric WCO1-M01: Monitoring the number of firm failures
This metric provides an indicator of the extent of firm failures occurring in the financial services market. Firm failures are a normal part of business, but can harm consumers, the effectiveness of markets, and overall confidence in the UK’s financial system. This metric will be heavily affected by wider economic circumstances.
Baseline value: 5 Wholesale markets firms (2021)
Latest value: 9 wholesale markets firms (2022)
The baseline has been updated as a result of improvements we’ve made to our data process to improve accuracy.
Source: FCA data
Metric WCO2-M01: Maintain the proportion of firms confident that the FCA’s oversight protects and enhances the integrity of the UK financial system
Firms’ confidence in our delivery of this strategic objective is one important factor that will influence overall confidence in markets.
Baseline value: 94% - Wholesale markets firms (2021)
Latest value: 89% - Wholesale markets firms (2022/23)
Difference between 2021 and 2022/23 is statistically significant.
Metric WCO2-M02: Increase in market cleanliness – decrease in the values of our market cleanliness statistics
These metrics provide an indicator of potential market abuse in equity markets. They comprise of 3 separate measures:
- Market Cleanliness (MC)
- Abnormal Trading Volume (ATV)
- Potentially Anomalous Trading Ratio (PATR)
It is difficult and potentially misleading to draw meaningful conclusions from year-on-year changes in these measures.
Baseline and latest value:
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Metric WCO2-M03: Increase in proportion of applications rejected, withdrawn or refused by the FCA under Money Laundering Regulations (MLRs) or for financial crime reasons
This metric provides an indicator of the strength of our Gateway in minimising financial crime within the regulatory perimeter. This metric needs to be considered in a wider context because if, over time, financial crime falls we would not expect to have a continuing increase in the number of applications rejected, withdrawn or refused. In time we may also see fewer unsuccessful applications if application quality improves.
Baseline value: 48 Annex I applications (21%) were rejected, withdrawn or refused. 122 cryptoasset registration applications (81%) were rejected, withdrawn or refused. This comprises all firms, across consumers and wholesale markets. (2020/21)
Baseline has been updated to financial year in line with data reported to HM Treasury
Latest value: 54 Annex I applications (24%) were rejected, withdrawn or refused. 88 cryptoasset business applications (93%) were rejected, withdrawn or refused. This comprises all firms, across consumers and wholesale markets (2022/23)
Source: FCA data, MLR registrations currently reported to HM Treasury annually
This metric is the same as the topline metric for Consumers Confidence – see Metric CC03-M05
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Access
What the latest metric values tell us
It is important that market participants are able to access a diverse range of services with minimised operational disruptions. Despite heightened threats last year, such as cyber risks, the number of operational disruptions reported by wholesale firms in 2022 has only slightly increased compared to 2021 (metric WAC1-M01). We expect this figure will be influenced in future by both our work to strengthen the reporting regime and as firms continue to implement our new operational resilience rules.
For further details, see the outcomes and metrics for our Minimising the impact of operational disruptions commitment.
Outcome: Markets are orderly in a variety of conditions so that market participants are able to access a diverse range of services with minimised operational disruption
We measure this with 1 metric:
Metric WAC1-M01: Reduction in the number of operational incidents
Operational disruptions can cause wide-reaching harm to consumers and pose a risk to market integrity, threaten the viability of firms and cause instability in the financial system. Future work on the completeness and granularity of incident reporting is expected to improve this data.
Baseline value: 194 incidents - Wholesale markets firms (2021)
Latest value: 197 incidents - Wholesale markets firms (2022)
Source: FCA Technology, Resilience and Cyber data
3. Our strategic transformation-linked outcomes and metrics
- In our 2021/22 Business Plan we committed to reporting 7 strategic outcomes and related metrics that aligned with our transformation programme. We report against these outcomes here.
- For each of these metrics we set out our intended direction of travel, a latest value and recent years data where available, the source and brief explanatory text. We also provide further detail about the data source, how the metric is calculated, some points to consider when interpreting the numbers and, where relevant, potential improvements and links to related material.
- Several of these metrics are the same as those we use for our subsequent topline and commitment outcomes, and in other cases the metrics may differ but use the same data sources. We point out these cross-references and sign-post to further details where appropriate. We will report updates for these metrics separately this year for transparency. But we will consolidate with the relevant topline and commitment outcomes and metrics in future.
In addition to the updates we report here for those commitments that align with and contribute to these transformation-linked outcomes, our Annual Report 2022/23 provides further details of the actions we have taken to progress those commitments.
Our Annual Report 2022/23 also provides further details of our transformation programme and the operational effectiveness actions that contribute in part to some of these outcomes. These include:
- leading by example and strengthening the FCA’s diversity of thought and representation through developing our regional presence and establishing our new Leeds office
- developing our Early and High Growth Oversight approach from pilot stage to provide enhanced supervision and support to more firms
- developing a new consumer section of our website to help consumers get the information and support they need
The following metrics are indicators of our progress against our strategic transformation-linked outcomes.
Setting the bar high to support sustainable innovation for consumers
We measure this with 1 metric:
Metric STO1-M01: Increase in aggregate benefits to consumers from our policy work
Consumers will be the primary beneficiary of our policy work, for example, setting rules or standards for new or evolving financial products and services to ensure consumers get fair value and good quality treatment. Some benefits may also fall on firms or other parties. But it is often not possible to separate the amount with accuracy. The benefits reported only relate to a quantifiable subset of our policy work. 2022 was the first time we compiled this analysis, covering the period April 2018-March 2021.
This metric is also one of the topline metrics for Consumer Fair Value – see Metric CFV1-M02. For further details on the latest value, see our update to the topline metric.
Metric value:
3-year annual average April 2018 - March 2021: at least £6.9 billion
3-year annual average April 2019 - March 2022: at least £9.6 billion
Source: FCA analysis of past Cost Benefit Analyses
Setting the bar high to support market integrity in wholesale markets
We measure this with 1 metric:
Metric STO2-M01: Increase in market cleanliness - decrease in the values of our market cleanliness statistics
We continue to monitor our suite of market cleanliness statistics. It is difficult and potentially misleading to draw meaningful conclusions from year-on-year changes in these measures however, as trends need to be considered over time and in context. Trading data may be influenced by wider market conditions, such as market volatility and high trading volumes, as well as other market dynamics.
This metric is also now one of the topline metrics for Wholesale markets confidence – (Metric WCO2-M02) as well as for our Delivering assertive action on market abuse commitment (Metric AMA3-M01)
For further details on the latest values, see our updates to these topline and commitment metrics.
Metric value:
|
|
2018 |
2019 |
2020 |
2021 |
2022 |
|---|---|---|---|---|---|
|
Market Cleanliness (MC) |
10.0% |
17.5% |
21.9% |
7.7% |
24.6% |
|
Abnormal Trading Volume (ATV) |
6.2% |
6.4% |
8.0% |
7.1% |
8.3% |
|
Potentially Anomalous Trading Ratio (PATR) |
6.1% |
6.7% |
6.9% |
6.1% |
4.7% |
Source: FCA market cleanliness statistics, calculated from FCA transaction data and prices from data vendors.
Ensuring firms start with high standards and maintain them
We measure this with 2 metrics:
Metric STO3-M01: Increase in FCA-led refusal/withdrawal/rejection rates for new firm authorisations
As we strengthen our Gateway and early years supervision, we are monitoring our refusal/withdrawal/rejection rates. We expect these to increase initially as we make the Gateway more robust. In 2022 we saw a continued increase in the refusal, withdrawal and rejection rates from 15% to 22% of application.
In line with expectations, this reflects our strengthened focus on scrutinising and blocking the entry of firms to the market that pose a risk of harm. It also reflects our work under our commitments to strengthen standards for both existing firms and prospective new firms wanting to be authorised. For example, new operational resilience or prudential requirements.
Metric value:
|
|
2020 |
2021 |
2022 |
|---|---|---|---|
|
FCA-led refusal/withdrawal/rejection rates for new firm authorisations |
8% |
15% |
22% |
Source: FCA data
Metric STO3-M02: Reduction over time in Financial Ombudsman Service complaints about newly authorised firms - involving their first 3 years of authorisation
As we strengthen our Gateway and early years supervision, we are monitoring complaints about newly authorised firms. By giving more support for firms in these early years, we expect to see the number of relevant ombudsman service complaints fall over time.
In 2022, we saw a continued reduction in the number of upheld complaints, though this reflected fewer closed complaints overall, with the percentage of upheld complaints remaining similar compared to the previous year.
However, the volume of complaints needs be considered in light of the number of new firms authorised during the period, as well as the type of firm, the market they operate in and their business volumes.
Over 2022/23, we expanded our new Early and High Growth Oversight approach, providing enhanced supervision and support for more newly authorised firms, but this is still in its early stages. Further analysis is therefore needed to understand any underlying trends and drivers.
Metric value:
|
|
2020 |
2021 |
2022 |
|---|---|---|---|
|
Upheld complaints |
625 |
312 |
164 |
|
Uphold rate |
41% |
33% |
32% |
|
For current firms authorised / registered |
2018-20 |
2019-21 |
2020-22 |
Source: FCA analysis of Financial Ombudsman Service complaints and FCA data
Using new approaches to find issues and harm faster
We measure this with 1 metric:
Metric STO4-M01: Stabilise and then reduce over time Financial Services Compensation Scheme (FSCS) compensation, claims and payments
We will evaluate our efforts to reduce disorderly failure by monitoring the value and volume of FSCS claims, with the aim of stabilising and then reducing these over a multi-year period to bring down the FSCS levy on the industry.
This metric is one of the top-line metrics for Consumer confidence (Metric CCO2-M01) as well as for our Improving the redress framework commitment (Metric IRF3-M01).
For further details on the latest values, see our updates to these topline and commitment metrics.
Metric value:
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Tackling harm and misconduct to maintain trust and integrity
We measure this with 1 metric:
Metric STO5-M01: Increase in the number of cancellations and withdrawals of permissions
We expect our increased capability to detect harms and signs of misconduct and act faster will lead to an initial increase in the number of firms whose permissions are cancelled or withdrawn.
For further details, see our updates to our Dealing with problem firms commitment.
Metric value:
480 firms had permissions cancelled or withdrawn (2021)
627 firms had permissions cancelled or withdrawn (2022)
The 2021 baseline measure has been updated to use the same calculation as for metric DPF1-M02.
Source: FCA data. This includes Threshold conditions and ‘Use It or Lose It’ cases.
Enabling consumers to make informed financial decisions
We said we would measure this with 4 metrics shown here, albeit our thinking on how best to measure this has now developed through our work on the Consumer Duty and the commitment on putting consumers’ needs first:
Metric STO6-M01: Reduction in the number and proportion of calls to the FCA that need redirecting to Financial Ombudsman Service or Financial Services Compensation Scheme
With improved communication with consumers and better signposting, for example through our website, we expect a reduced number and proportion of calls to the FCA that we need to direct elsewhere. In 2022, there were further reductions in both the number and proportion of calls that we needed to redirect to the ombudsman service or FSCS.
Metric value:
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Metrics STO6-M02, STO6-M03 and STO6-M04: Increase in the effectiveness of the ScamSmart campaign
Our ScamSmart campaign is a key strand of our communication with consumers. It helps them avoid becoming victims of pension and investment scams, which can cause serious financial harm.
We evaluate each campaign burst to understand its effectiveness and how the next burst can be improved. The evaluation data from after the latest campaign burst indicates that awareness of ScamSmart among target audiences was down for pensions but up for investments.
There was increased consumer confidence in spotting scams among the pensions audience, however, investments showed lower levels of reported confidence among the older target audience than previous campaigns.
Metric STO6-M02: Increase in the effectiveness of the ScamSmart pension scams campaign
Metric value:
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Metric STO6-M04: Increase in the use of the ScamSmart website and clicks through to the Financial Services Register
The website analytics represent total views annualised across all ScamSmart campaign activity. While helpful to monitor, the numbers of ScamSmart webpage views, clicks through to the FCA Register to check a firm, and resulting warnings about unauthorised firms will all vary depending on campaign activity and the extent and nature of any current scams.
Views of the ScamSmart webpage were noticeably up in 2022 compared to 2021, possibly reflecting increased or more prominent signposting by firms as well as our campaign activity.
Note: in Autumn 2019 a new opt-in cookie policy significantly impacted the number of users and page views. Previous year’s figures have also been updated to include all ScamSmart campaign activity throughout year, as opposed to only pensions campaign activity which was reported previously.
Metric value:
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*User tracking for this action commenced on 22 Aug 2018.
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Diversity and Inclusion across the industry
We measure this with 1 metric:
Metric STO7-M01: Increase in the proportion of FCA female and minority ethnic colleagues
To ensure that we are as diverse and inclusive as possible, we are continuing to monitor and set targets for ourselves. As of March 2023, we have seen improvements in our diversity at nearly all levels from the previous year. For further details on our diversity figures and progress, see our Diversity pages.
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Note that figures are for FCA only and do not include PSR.
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Note that figures are for FCA only and do not include the PSR.
4. Measuring the outcomes of our commitments
Our Strategy sets out our 13 commitments for 2022/23 to 2024/25.
For each commitment we have identified the outcomes we want to achieve for consumers and wholesale markets and have developed a series of metrics to monitor our progress towards these. We have also linked each outcome to our consistent topline themes.
These metrics are set out below, where we provide baselines and the latest values that are available, we also summarise key points about the metrics we have chosen. We recognise that no metric is a perfect measure of the outcome and that all metrics have limitations. Below we explain some key points of interpretation about the metrics.
Some of these metrics use the same data sources as we have used for our topline and transformation outcomes. We point out these cross-references where appropriate.
In few cases where metrics are not yet available, we explain what metrics we are planning to develop and monitor in the future. As with all our metrics, we plan to continuously improve and develop these over time.
View the outcomes and metrics for each of our commitments:
4.1 Dealing with problem firms
4.2 Improving the redress framework
4.3 Reducing harm from firm failure
4.4 Improving oversight of Appointed Representatives
4.5 Reducing and preventing financial crime
4.6 Delivering assertive action on market abuse
4.7 Putting consumers’ needs first
4.8 Enabling consumers to help themselves
4.9 Our environmental, social and governance (ESG) priorities
4.10 Minimising the impact of operational disruptions
4.11 Preparing financial services for the future
4.12 Strengthening the UK’s position in global wholesale markets
4.13 Shaping digital markets to achieve good outcomes
We welcome your views on the metrics we have proposed at [email protected].
4.1. Dealing with problem firms
We have used 5 metrics to track our 2 outcomes related to dealing with problem firms.
We have 3 operational metrics (DPF1-M02, DPF2-M02, DPF2-M03) which reflect the step change we want to make in the way we deal with problem firms. This includes the enhancement of our data-led capabilities enabling us to proactively detect problem firms where possible.
First, we expect that our focus on intervening faster and stronger when firms fail to meet Threshold conditions will show a short-term increase in the number of cancellations and withdrawals of permissions (DPF1-M02). We then expect this to decline as relevant firms adjust their conduct to fit with our expectations.
We’ve introduced an operational metric related to the volume of stronger own-initiative interventions we take (DPF2-M03). This involves getting firms or individuals to take specific actions, stopping or restricting their activities, withdrawing permissions, or putting conditions on their approval.
We anticipate this metric will show increases in the short-term. However we recognise that other interventions – including voluntary action – may mean firms start to put things right by themselves leading to fewer own-initiative interventions that are needed.
This metric will be developed further to also report on other types of interventions we take with firms and individuals (such as voluntary interventions).
We’re taking steps to intervene quicker. We are developing the metric (DPF2-M02) for the pace that we intervene after we have identified serious harm.
For Metrics DPF1-M01 and DPF2-M01, we’re publishing firm feedback in response to new questions added to the 2022/23 FCA and Practitioner Panel survey. These questions consider firms’ awareness and perceptions of our effectiveness in acting when Threshold conditions are not met.
They also consider the extent to which we act quickly to stop harm. We’ll use these as baseline values for monitoring this metric in future. We expect our work to increase awareness and perceptions that firms who fail to meet Threshold conditions are identified promptly and their status withdrawn.
We recognise that we’re dealing with problem firms across many of our other commitments, for example in our work on financial crime. This will also contribute to our success in this area.
What the latest metric values tell us
For metric DPF1-M02, the number of cancellations and withdrawals of permissions increased in 2022. This shows the commitment in our efforts to quickly cancel firms, using our new cancellation powers, where applicable.
Following the FCA and Practitioner Panel survey results, we’ve published baseline figures for Metrics DPF1-M01 and DPF2-M01. These show that 94% of firms state that they are very, or fairly, familiar with FCA Threshold conditions.
A total of 53% agree, or strongly agree, that firms who fail to meet FCA Threshold conditions are identified promptly, and their status withdrawn where appropriate. 50% agree or strongly agree that the FCA is quick to intervene to stop harm.
The FCA and Practitioner Panel survey also shows that in 2021 55% of firms were aware of the FCA withdrawing permissions from firms or individuals. This has increased to 71% in the recent 2022/23 survey.
For metric DPF2-M03, the number of own-initiative interventions reduced in 2022, compared to 2021. This reflects our work to engage with firms earlier to stop harm. Consequently, we’ve seen an increase in cases where firms comply or rectify issues voluntarily.
4.2. Improving the redress framework
We’re committed to reducing and preventing serious harm. Sometimes things will go wrong. But when that happens, we want people to be put back in the position they should have been in.
Whenever possible, we want the firms that are responsible for the harm to be the ones to put things right. This means that we need a redress framework that delivers redress at the earliest possible point. Where possible, consumers should be repaid swiftly by the firm which caused the harm without them having to complain.
If a complaint is made, it should be resolved as efficiently and effectively as possible. This is to avoid further costs being incurred by the consumer, business or the wider industry.
We’ve set out 4 outcomes related to improving the redress framework and 9 metrics to monitor our progress against those outcomes.
One of the metrics is under development. It is dependent on us consulting on changes to the complaint-reporting rules.
Two of our metrics use FCA complaints data (IRF2-M01, IRF2-M02). Here we’re looking to see increases in timeliness of firms’ complaint resolution and increases in the proportion of complaints upheld by firms meaning more consumers having their complaint dealt with without having to go to the Financial Ombudsman Service.
The nature of metrics based on complaints is such that these will always be ‘after the event’. Therefore they are lagging indicators. So, it’ll take some time before the impact of our work begins to show through. FSCS claims may also be affected by other drivers of firm failure — such as economic conditions.
The wider context in which these metrics sit is also important, especially as redress events can span multiple years and complaints can only tell us part of the story. For example, a rise in complaint volumes may indicate an increase in levels of consumer awareness about historical instances of harm. For this reason we’re seeking to measure awareness of the redress system as well (IRF4-M01).
Over time we would expect awareness to increase. But our baseline may be artificially high given the advertising around the PPI complaint deadline in 2019.
We recognise the limitations of metric IRF4-M01 in capturing consumer understanding of the redress system. This is because it only considers consumer awareness of being able to make a claim for compensation directly, without using a Claims Management Company (CMC).
This is a complex area. We’re exploring with the regulatory family further ways to measure consumer understanding.
Metrics IRF1-M01 and M02 are based on questions in our Financial Lives survey (FLS). Over time, we would expect to see an increase in the proportion of consumers who consider that the service they received from a CMC met their expectations and that the fee they paid was fair.
It should be noted that these questions ask consumers about their subjective experiences and the outcome of their actual claims can therefore influence this perception. They may also be impacted by the different types of complaint which CMCs choose to represent.
IRF1-M03 was intended to demonstrate the reduction in IFAs phoenixing into CMCs. The FCA made rules to prevent this last year and is something we’ll continue to track and act should this not be the case.
A more meaningful measure to monitor progress is the new metric IRF1-M04. This uses Financial Ombudsman Service data to track how successful CMCs are in obtaining redress from complaints at the Financial Ombudsman Service.
It’s important to note that a high CMC uphold rate doesn’t indicate that consumers are more likely to have their complaint upheld if they use a CMC. It indicates we would expect a CMC to only advise consumers to escalate their complaints to the Financial Ombudsman Service if they had a reasonable prospect of being upheld, as is required under our rules.
We note that some CMCs are not FCA authorised and are regulated by the Solicitors Regulation Authority. So our metrics will only reflect part of the consumer experience in relation to representatives.
We’ve also developed a metric about upheld complaints to firms (IRF2-M02) based on data which we already collect. We expect to see increasing uphold rates over time for CMC-represented complaints. This shows they are only escalating appropriate complaints to the Financial Ombudsman Service.
We’re also developing proposals to improve complaints reporting. This’ll enable us to better assess whether firms are putting things right themselves (IRF2-M03). This will also help us spot issues earlier and support our assertive interventions.
We’re tracking data about FSCS compensation and levy costs. This is so we can track progress in relation to the stabilisation of the redress burden arising from insolvent firms’ unpaid liabilities through FSCS claims over a multi-year period — with a view to a subsequent reduction.
Further detail on Financial Services Compensation Scheme data, Financial Lives survey data and Financial Ombudsman Service data.
What the latest metric values tell us
Metric IRF2-M01 tracks how quickly firms resolve complaints. It’s good to see firms making some progress in resolving complaints more quickly in 2022. This means customers aren’t waiting as long for their problems to be resolved, with the number waiting over 8 weeks dropping from 9.5% to 5.5%.
Related to this is IRF2-M02 which looks at the proportion of complaints which firms have upheld directly – this has increased slightly from 59% in 2021 to 60% in 2022.
This may indicate that more complaints are being upheld directly by firms without having to be escalated to the Financial Ombudsman Service. It is too soon to tell if this is natural variation or a trend. But this is an area we’ll continue to monitor.
Metrics IRF3-M01 and IRF3-M02 track the number of, and amount paid in, claims to the FSCS and the related levy bill. While the number of new claims has decreased the number of payments made has increased and the overall amount of compensation paid has remained steady. The amount of levy charged to firms has increased but is expected to fall for 2022/23.
FSCS costs include past misconduct that happened 5-10 years ago, and we know there are still existing liabilities in the pipeline.
We also expect firms’ financial resilience to weaken due to the economic situation, which could lead to a lagged increase in redress linked to firm failure and misconduct.
Metric IRF1-M04 tracks the number of CMC-represented complaints which are upheld by the Financial Ombudsman Service. It’s good to see that the uphold rate for complaints represented by CMCs has increased from 34% to 43%. This indicates CMCs are escalating more appropriate cases to the Ombudsman Service.
Metrics IRF1-M01 and IRF1-M02 are new questions in our FLS so there is no previous data to compare the results to yet. We expect the new rules we introduced in 2022 to cap CMC fees will, in time, positively affect the notably low proportion (39%) of consumers who made a claim in the last 3 years and used a CMC for their most recent claim who consider the fee they paid was fair. As well as that the proportion of these consumers who consider that the service provided met their expectations (this currently stands at 57%) will also increase.
For Metric IRF4-M01, the proportion of consumers who’re aware they can make a compensation claim for mis-selling of a financial product or service directly, without using a CMC, has decreased from 63% in 2020 to 55% in 2022.
Higher awareness in 2020 is likely to be linked to the deadline for complaining about PPI being August 2019 — just before the fieldwork for the 2020 survey started. There was significant advertising by both the FCA and CMCs in the run-up to the deadline. The lower awareness in 2022 reflects less communication around this topic in 2022.
We’re instigating work across our regulatory partners to look at how we can improve against this metric.
|
Consistent topline Theme |
Outcomes
|
Metrics |
|---|---|---|
|
Confidence |
The redress system delivers timely and fair complaint resolution and compensation to consumers |
Metric IRF2-M01: Increase in the overall timeliness of firms’ complaint resolution measured by the proportion of complaints closed within 3 days, between 3 days and 8 weeks, and after 8 weeks Baseline value: Complaints closed within 3 days: 48% Complaints closed after 3 days but within 8 weeks: 42% Complaints closed after 8 weeks: 9.5% (2021) Baseline has been adjusted to also include 2021 H1 figures to give the total % for 2021. Latest values: Complaints closed within 3 days: 49% Complaints closed after 3 days but within 8 weeks: 46% Complaints closed after 8 weeks: 5.5% (2022) Note- slight sum error due to rounding methodology used (ie. round numbers 10-90, 1dp <10 & >90) Source: FCA Firm Complaints data |
|
Metric IRF2-M02: Increase in complaints upheld by firms, measured by increase in proportion of complaints upheld by firms from FCA complaint data Baseline value: 59% (2021) Latest value: 60% (2022) Source: FCA Firm Complaints data |
||
|
Metric IRF2-M03 under development: Increase in instances of firms putting things right by themselves
|
||
|
Confidence |
Firms that create redress burden bear the associated cost themselves
|
Metric IRF3-M01: Stabilisation of the redress burden arising from insolvent firms’ unpaid liabilities through FSCS claims over a multi-year period, with a view to a subsequent reduction Baseline value: 28,007 new claims; 43,407 payments were made, and compensation payments amounted to £584m (FY 2020/21) Latest value: 24,709 new claims; 62,380 payments were made, and compensation payments amounted to £584m (FY 2021/22) Source: FCA analysis of FSCS data This metric uses the same data as the topline metrics for Consumer Confidence– see CCO2-M01, and strategic transformation metric – STO4-M01 |
|
Metric IRF3-M02: To stabilise the overall FSCS levy bill, with a view to a future reduction, and to minimise the occurrence of calls on the Retail Pool, which represents the cost which industry levy payers need to meet Baseline value: Total Levies firms paid £700m (FY 2020/21) Latest value: Total Levies firms paid £717m (FY 2021/22) Source: FCA data |
||
|
Confidence |
Consumers understand the redress system and how to access it
|
Metric IRF4-M01: Increase in proportion of consumers who are aware that they can make a compensation claim for mis-selling of a financial product or service directly, without using a CMC Baseline value: 63% of consumers (2020) Latest value: 55% of consumers (2022) Difference between 2020 and 2022 is statistically significant Source: FCA FLS |
|
Fair value |
The Claims Management Companies (CMC) sector delivers fair value
|
Metric IRF1-M01: Of those consumers who used a CMC in the last 3 years, an increase in the proportion who consider that the service provided met their expectations Baseline value: 57% of consumers (2022) Source: FCA FLS |
|
Metric: IRF1-M02: Of those consumers who used a CMC in the last 3 years, an increase in the proportion who consider that the fee they paid was fair Baseline value: 39% of consumers (2022) Source: FCA FLS |
||
|
Metric IRF1-M04 under development: Increase over time in CMC-represented Financial Ombudsman Service complaints that are upheld
Baseline value: 34% uphold rate (2021) Latest value: 43% uphold rate (2022) Source: FCA analysis of Financial Ombudsman Service data
|
4.3. Reducing harm from firm failure
Firm failure is inevitable in every market. When financial firms fail, there are risks of consumer harm, such as loss of client assets or threats to wider market stability.
Our outcomes are designed to make sure that these risks are minimised and where firms do fail, they do so with minimal harm to consumers and wider markets.
The capital firms hold, as well as their financial resource management and strong client asset management frameworks, all support firm resilience – especially when a firm’s position deteriorates.
We use a range of data available to identify when things start to go wrong. Our monitoring of this data – and the metrics set out here – will tell us about what is happening in firms. However, it can’t identify all the externalities that could lead to a strain on resilience.
We monitor 3 outcomes for this commitment, each with 1 metric.
We want firms to be able to conduct business and wind-down without causing significant harm. This is why we set financial resource requirements for some types of firms where the risk of harm resulting from failure is greater. A low and stable proportion of these firms who don’t meet our financial resource requirements (PFF1-M01) indicates that firms are generally able to do this.
Where firms meet financial resource requirements, they can still cause harm if they fail. As a result, the metric doesn’t perfectly capture progress towards the outcome. However, it is still a reasonable indicator.
We want to make sure that client assets and funds are appropriately held and protected. On the metric looking at CASS audits (PFF2-M01), a low and stable proportion of firms with adverse CASS audits indicates that firms generally do hold client assets and funds appropriately. To calculate this metric, we assess the number of ‘Reasonable Assurance’ audits with an adverse opinion.
We want to identify firms which are at risk of failure at an early stage so that we can minimise the risks when they fail. The third metric (PFF3-M01) gives the proportion of failed firms which, in the 12-month period before entering an insolvency process, our supervisors determined to be at risk of imminent failure. Or our automated triage framework identified them as having a low level of financial resilience.
We’re looking for this metric to increase as we become better at identifying firms at risk of failure. This is to make sure harms are minimised when they fail. However, we’ll never be able to anticipate all failures as some will be driven by external shocks.
Also please note that we’re only able to provide a partial measure for metric PFF3-M01 focusing on financial stresses and insolvencies. This is due to data coverage constraints. We’ll look to refine this metric as we improve internal systems and processes to record insolvency data more effectively.
What the latest metric values tell us
For metric PFF1-M01, we’ve observed an increase in the percentage of firms who aren’t meeting financial resources requirements between December 2021 and 2022 (1.7% in December 2022 compared with 1.3% in 2021).
However, this still represents a low proportion of firms. There is no primary driver for the increase observed during this period, though the adjustment for some firms to the strengthened standards of the new investment firms’ prudential regime in 2022 may have had an impact on the data.
The current macro-economic environment is also a challenging one. Increasing challenges to businesses can present a growing risk of firm failure. There may also be an impact on firm financial resources. We’ve focused strongly on communicating with firms and their planning. This may have contributed to us not seeing a more significant increase given this wider context.
For metric PFF2-M01, there were slightly fewer adverse reasonable assurance CASS opinions in 2021 (8.3% compared with 9.1% in 2020 out of c870 reasonable assurance audits). This indicates CASS compliance with adverse audits remains less than 10%.
For metric PFF3-M01, as of November 2022, our supervisors determined 59% of failed firms to be at risk of imminent failure. Or our automated triage framework identified them as having a low level of financial resilience in the 12-month period before entering an insolvency process.
We’ll use this as our baseline value. As well as this, we’ll monitor changes in this value going forward and will be looking for this proportion to increase.
4.4. Improving oversight of Appointed Representatives
We’ll monitor data from principal and non-principal firms on the number of complaints raised (OAR1-M01). We ultimately expect these to decrease when customers get suitable information, advice and products from Appointed Representatives (ARs).
We anticipate any reduction in complaints will lag behind the changes we’re making to improve oversight of ARs. It’ll take time to see the effects of our work in the data. We may also see increases in the short-term where our work reveals the misconduct that drives complaints.
We’ll continue to evolve our measures as the work progresses and the data we obtain improves, including exploring how FSCS claims attributed to principals and ARs compares to FSCS claims attributed to non-principal firms.
We’ll also consider how the number of complaints to principal firms compare, in the longer term, with references to the ombudsman service and upheld complaints.
In addition, we’ve identified an operational metric (OAR2-M01) which monitors the withdrawal rate of notifications by firms wishing to add ARs to their permissions following intervention by Authorisations.
Alongside this metric, it’s useful also to consider the:
- rejection
- withdrawal
- refusal rate
of applications for FCA approval of individuals to perform controlled functions in ARs. We expect to see these to increase in the medium term as we strengthen our scrutiny at the regulatory Gateway.
Over the long-term, we would like to see the rate decrease due to an improvement in the quality of notifications and applications based on improved due diligence by principals.
We’re also looking to add a metric (OAR2-M03) on the volume of supervisory cases and volume of interventions tools linked to ARs.
Again, we expect to see this increase in the short-to-medium term as we undertake more assertive supervision of high-risk principals and improve standards using the new business, revenue and complaints data collected on all ARs and additional information collected at the Gateway.
Further detail on Financial Services Compensation Scheme data and ombudsman service data.
What the latest metric values tell us
For metric OAR1-M01, complaints data show an improved picture for principals and ARs compared to non-principal firms. In 2020, in 11 out of 12 sub-portfolios, principals and ARs were generating >20% more complaints than non-principal firms, whereas in 2022 this had fallen to 7 out of 12.
Nevertheless, overall principals and ARs are still generating more complaints per £1m of revenue than non-principal firms in each of the 3 key retail portfolios in 2022.
For metric OAR2-M01 we saw a reduction in the withdrawal rate of notifications by principals wishing to add ARs to their permission: in 2021, the rate was 4% and in 2022 the rate was 2%. However, we think this is partly explained by the significant increase in cases assessed during 2022 than in previous years.
During 2022 we reduced our caseload for principals wishing to add ARs to their permissions by 93% leading to quicker turnaround times for principal firms. The overall number of withdrawals was only slightly lower in 2022 than for 2021, but equated to 2% of cases due to the higher volumes of cases assessed.
In percentage terms the rate of withdrawals for individual applications remained constant at 3% for both 2021 and 2022. However, we reduced our caseload of individual approval applications by 50%.
In numerical terms therefore we saw an increase in applications withdrawn in 2022, but this is not reflected in the percentages due to the overall larger volume of cases assessed during this period.
On 8 December 2022, we launched our revised form for firms wishing to add ARs to their permissions containing several extra questions and increased our scrutiny of individual applications. We anticipate that future metrics publications will reflect the impact of these questions on the rate of withdrawals and quality of notifications.
For metric OAR2-M02, our supervisory interventions have seen principals terminating relationships with 153 ARs and 618 IARs between 01 July 2022 and 31 March 2023 alone.
In 2021, we undertook a significant exercise raising cases against ARs and their principal firms who failed to tell us when the AR changed name, entered administration, liquidation or dissolution.
This exercise led to a significant spike in cases opened relating to ARs in 2021 – with a drop in 2022 – but still at a higher level than in 2020. This metric will be developed further to include action relating to additional intervention tools.
Finally, our FCA and Practitioner Panel survey 2022/23 (metric OAR3-M01) showed that, because of the FCA’s actions over the last 12 months, 56% of principal firms surveyed think that oversight of ARs by principal firms in their sector has improved (with 1% saying it had decreased).
4.5. Reducing and preventing financial crime
We have seen fraud rates stabilise over the last year as the financial service industry has continued to focus on prevention. Fraudsters no longer have the same level of access to potential victims following the lifting of COVID restrictions in the UK.
However, with the forthcoming introduction of mandatory reimbursement in relation to Faster Payments, we may potentially see an increase in fraud rates as more consumers report smaller fraud losses to their banks to recoup losses.
Consumers may also fall victim to the increasingly sophisticated social engineering techniques being employed by fraudsters which are often adapted to fit current trends and habits.
The Government has now set out its fraud strategy which will underpin the continued drive to reduce fraud in the UK.
Where our powers and remit mean we can have an impact on investment fraud and Authorised Push Payment (APP) fraud, we set ourselves ambitious outcomes and we measure how effective we are in achieving them.
There are wide-ranging drivers of the different types of fraud and an array of parties who can affect its prevalence and impact on victims. The effect on outcomes depends on those partners working together and taking actions, as well as us. The incidence of fraud is also affected by levels of consumer awareness and consumer behaviour, so it’s challenging to isolate and measure the impact of our interventions on fraud.
We have chosen to use metrics that best represent the outcomes from the available data, although there are some limitations.
To measure progress towards our outcome to slow the growth in investment fraud victims and losses we use National Fraud Intelligence Bureau (NFIB) data (metric PFC1-M01) which monitors reported investment fraud victims and losses. However, this doesn’t allow us to determine how much reported fraud relates to authorised or unauthorised firms. There may also be a degree of misclassification in the data.
We’ve narrowed the categories of fraud captured by NFIB and only draw on NFIB data relating to fraud within our remit and which we have prioritised. As we develop our data capabilities and understanding of the fraud landscape, these priorities may change.
As there is no NFIB data available to track progress towards our outcome to slow the growth in APP fraud, we will monitor UK Finance data (PFC2-M01). While this doesn’t cover all authorised firms, it does give a comprehensive view of the fraud outlook by analysing data from 300 member firms. All of these provide credit, banking, markets and payment-related services in the UK.
Our money-laundering metrics identify 2 things – an increase in the metric as an indicator of the strength of our Gateway to make sure of high standards and to minimise financial crime within the regulatory perimeter (the legal boundary between what we do and don’t regulate) (PFC3-M01) and as an indicator of our approach to sanctions (PFC3-M02).
Over time, as our work on money laundering and financial crime has wider impacts, we might expect these metrics to stabilise as firms adjust their conduct to fit with our expectations.
Our operational metric (PFC4-M01 and PFC4-M02) focuses on cases opened in relation to financial crime and fraud. This reflects the fact that we expect to see an increase in fraud supervisory cases in the short-term. But as our strategy develops, we expect to reduce the number of cases opened in the longer term.
Our Office for Professional Body Anti-Money Laundering Supervision (OPBAS) metric focuses on improving effectiveness (PFC3-M03). OPBAS will look to externally validate and benchmark where possible.
This includes through data, for example, Reg 46a reports, engagement and intelligence sharing across the ecosystem of:
- fellow supervisors
- regulators
- intelligence agencies
- law enforcement partners
What the latest metric values tell us
For metric PFC1-M01, while there were 3.5% fewer victims of investment fraud in 2022 compared with 2021, losses were up by 6.8%. This increase in losses is considerably less than reported between 2020 and 2021 when there was a 53% increase.
Our data is drawn from the National Fraud Intelligence Bureau which receives all Action Fraud reports. Victims reporting to Action Fraud tend to be those that have experienced higher losses than average, while smaller losses are more likely to be reported to banks and picked up in APP fraud data.
It remains challenging to measure our impact on overall investment fraud trends, however we have made a significant contribution towards tackling investment fraud by way of interventions to protect consumers from harm and campaigns aimed at raising awareness.
Please see the Enabling consumers to help themselves section and our 2022/23 Annual report for highlights on our work in this area.
For metric PFC2-M01, in 2022 there was a 6% increase in APP fraud cases and a 17% reduction in losses in comparison to 2021. This is positive compared to the 27% increase in reported cases and 39% increase in reported losses we saw between 2020 and 2021. However, overall losses to APP fraud are 15% higher, and cases 34% higher, in 2022 than they were in 2020.
It is not clear what is driving the current slowing down of the growth in fraud rates. This is because there are wide-ranging drivers of fraud and an array of parties who can affect its prevalence and impact on victims. However Strong Customer Authentication and Confirmation of Payee are likely to be having a positive impact.
The most prevalent type of APP fraud remains investment scams, but as highlighted in metric PFC1-M01 victims are decreasing and the growth of losses is slowing.
Scammers have less access to victims following the lifting of COVID restrictions and consumers may less likely to be looking for investment opportunities in the current economic climate. However those that are, may be willing to take higher risks when deciding upon investment products.
We’ve continued to work with partners on legislative and regulatory changes to help banks protect consumers from falling victim to APP fraud. We expect the forthcoming changes to incentivise firms to invest in enhancing their fraud controls and we are working closely with firms to prevent fraud. But it remains challenging for the financial services industry alone to prevent fraud.
This is because fraudsters are becoming more sophisticated in their methods of deception, bypassing the banks’ advanced technologies by using social engineering techniques via online platforms or telephone contact. A whole system response is still needed to impact overall APP rates.
For metric PFC3-M01, the rate of Rejection, Withdrawal and Refusals (RWR) for Annex I institutions applying to register under the Money Laundering Regulations (MLRs) was slightly higher than the previous year. In other applications for registration under the MLRs, such as for UK cryptoasset businesses, we also see a higher RWR rate.
For metric PFC4-M02, our operational data shows we opened 58% more fraud cases in 2022 compared to 2021, the majority of which related to unregistered cryptoasset firms. The increase in cases is directly attributable to our increased scam website detection capabilities and website take-down requests – both of which seek to protect consumers from harm.
Other categories of fraud cases we saw in 2022 include Bounceback Loans where fraudulent applications were being made by SMEs to lenders. The increase in these cases follows our Dear CEO letter sent out in 2021.
This letter reminded firms of their reporting obligations. It resulted in firms reporting more regulated entities suspected of submitting fraudulent applications. We also continued to open cases relating to share fraud, APP fraud, mortgage fraud and unauthorised banking frauds in 2022.
For metric PFC3-M03, our OPBAS metric is looking for a change in Professional Body Supervisor (PBS) effectiveness over time. Our Year 4 report shows that Professional Body Supervisors (PBSs) continue to deliver iterative improvements in effectiveness. But there is still more effort and action needed to achieve full and consistent effectiveness.
For metric PFC4-M01, we’ve seen a significant increase in proactive sanctions work in following the outbreak of war in Ukraine. As highlighted in our annual report, we conducted 38 proactive assessments and reviewed around 100 suspected sanctions breaches.
|
Consistent Topline Theme |
Outcomes |
Metrics |
|---|---|---|
|
Confidence |
Slow the growth in investment fraud victims and losses |
Metric PFC1-M01: Reported investment fraud victims and losses. The metric provides an indicator of the prevalence of investment fraud in the UK and is made up of the following typologies within NFIB data:
Baseline values: 20,674 total reported victims, £542.1m total reported losses (2020) 26,482 total reported victims, £832.5m total reported losses (2021) Between 2020 and 2021 there was 28% growth in reported victims and 53% growth in losses Baseline has been updated to reflect revised figure published by NFIB. Latest values: 25,558 total reported victims, £888.8m total reported losses (2022) Between 2021 and 2022 there was a 3.5% reduction (ie negative growth) in reported victims and 6.8% growth in reported losses Source: NFIB. This metric is the same as the topline metric for Consumer Confidence – see CCO3-M03 |
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Slow the growth in Authorised Push Payment (APP) fraud cases and losses |
Metric PFC2-M01: Reported APP fraud cases and losses. The metric provides an indicator of the prevalence of APP fraud in the UK Baseline values: 154,614 total reported cases, £420.7 m total reported losses (2020). 195,996 total reported cases and £583.2m total reported losses (2021) Between 2020 and 2021 therefore there was 27% growth in reported cases and 39% growth in reported losses Baseline updated to reflect revised figures published by UK Finance. Latest values: 207,372 total reported cases, £485.2m total reported losses (2022) Between 2021 and 2022 there was 6% growth in cases and 17% reduction in losses Source: UK Finance This metric is the same as the topline metric for Consumer Confidence – see CCO3-M04 |
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Reduction in financial crime by lowering the incidence of money laundering through the firms we supervise directly and by improving the effectiveness of supervision by professional body supervisors
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Metric PFC3-M01: Increase in the proportion of applications rejected, withdrawn or refused by the FCA under Money Laundering Regulations (MLRs) or for financial crime reasons Baseline value: 48 Annex I applications (21%) were rejected, withdrawn or refused (2021/22) 122 cryptoasset registration applications (81%) were rejected, withdrawn or refused (2021/22) Baseline has been updated to financial year in line with data reported to HM Treasury Latest value: 54 Annex I applications (24%) were rejected, withdrawn or refused (2022/23) 88 cryptoasset registration applications (93%) were rejected, withdrawn or refused (2022/23) Source: FCA data, Money Laundering Regulations (MLR) registrations currently reported to HM Treasury annually This metric is the same as the topline metrics for Consumer Confidence – see CCO3-M05, and Wholesale markets Confidence – see WCO2-M03 |
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Metric PFC3-M02: Increase in the number of customer and payment sanctions alerts generated by firms as reported through the annual financial crime data return Baseline value: 7,629 alerts (2019/20) Latest value: 6,755 alerts (2021/22) Source: FCA regulatory returns |
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Metric PFC3-M03: Change in Professional Body Supervisor (PBS) effectiveness over time. Baseline values: OPBAS September 2021 report Latest values: OPBAS April 2023 report Source: OPBAS (Supervision, Intelligence and Policy) |
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Metric PFC4-M01: Number of cases opened relating financial crime Baseline value: 548 Financial crime cases opened (Apr 2020 – Mar 2021) Latest values: 366 financial crime cases opened (April 2021- March 2022) 613 financial crime cases opened (April 2022- March 2023) Source: FCA data |
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Metric PFC4-M02: Number of cases opened relating to fraud Baseline value: 1,271 fraud cases opened (2021) Latest value: 2,013 fraud cases opened (2022) Source: FCA data |
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4.6. Delivering assertive action on market abuse
We’re developing a new range of metrics to assess our outcomes on market abuse.
As with all crimes that are not self-reporting, it is inherently challenging to measure levels of market abuse accurately. Measurement using centralised detection techniques will be influenced by the effectiveness of those techniques (for example, as detection methodologies improve, instances of detected market abuse will rise).
We use proxies (including our detection metrics, anomalous markets events and survey data) to build up a picture of likely market abuse and its impact on market confidence. This is not yet sufficiently precise however, and our historic measures may be amended or retired as we develop our thinking further.
We already have our measures of market cleanliness (AMA3-M01). These values measure instances of abnormal price movements or anomalous trading volumes in advance of significant price sensitive market announcements, with higher values possibly indicating potential insider trading activity.
However, these values can be substantially affected by other factors such as sample size, high volatility or other market dynamics. (For further information, see our latest published statistics: Market cleanliness statistics 2022/23).
As part of developing other measures, we’ve begun measuring the perceptions of market participants about market integrity and cleanliness (AMA1-M01 and AMA1-M02). Additionally, we’ll measure progress in our work to enhance corporate transparency by considering the number of overall interventions to promote better disclosures (AMA2-M01) – as well as other enforcement actions (AMA4-MO1).
These measures will be affected by our capacity to detect poor disclosures as well as overall market conditions.
A decrease in the number of interventions longer term may indicate that standards are improving. So this metric will need to be interpreted alongside indicators of market cleanliness.
What the latest metric values tell us
On market cleanliness, we saw an increase in abnormal price movements and anomalous trading volumes in 2022 compared with 2021 (metric AMA3-M01). Year to year changes may not reflect significant trends however. Episodes of high volatility, after the Russian invasion of Ukraine and other significant economic and political developments throughout the year, could have affected our 2022 measures.
The increasing trend we have seen of forced announcements following media speculation may also have adversely affected 2022’s data. (For more information see our market cleanliness statistics).
We increased the number of market oversight enquiries we opened for potential failure of listed companies to disclose properly (metric AMA2-M01). This increase may reflect greater reporting of potential disclosure failures to us and, our reaction to significant market events, but also other organisational factors relating to how we handle casework.
2022/23 also saw a significant uptick in our enforcement and regulatory action in secondary markets (AMA4-M01). We delivered 3 enforcement outcomes against regulated firms for failures in market abuse systems and controls. We charged 5 individuals for insider dealing and are undertaking regulatory action in an ongoing market manipulation case.
Also in 2022/23, as part of our broad-based work to combat market abuse, we worked with regulated firms to close 156 accounts where we had evidence these were being used to commit market abuse.
These interventions, together with our other market engagement activities, may be reflected in firms’ broadly positive view of our effectiveness in tackling market abuse. Over 60% of wholesale market firms believe we’re effective at protecting markets from delayed or misleading disclosures, insider dealing and market manipulation, in response to new questions included in the latest 2022/23 FCA and Practitioner Panel survey (metric AMA1-M01).
Firms’ perceptions of cleanliness in UK markets were more mixed, however (AMA1-M02). Almost half of firms (47%) think that market abuse is an issue in the UK, compared to 37% who think it is not an issue.
Despite this, 42% of firms believe that the FCA has been better in combatting market abuse in the UK compared to regulators in other global markets. Only 2% believe the FCA has been worse (with 22% saying about the same).
We’ll use the responses to these new survey questions as baselines to measure progress. We expect our work in 2023/24 will positively influence these perceptions over time.
This includes improving our detection capability and market surveillance, building a coordinated approach to high-risk firms and deterring abuse through strengthened enforcement action.
|
Consistent Topline Theme |
Outcomes |
Metrics |
|---|---|---|
|
Access |
Increased confidence in the integrity of UK markets which maintains high levels of participation across the buy-side and sell-side |
Metric AMA1-M01: Increase in perceived effectiveness of our action to promote market integrity Baseline Value: Over the last 12 months % of firms who think the FCA has been very or fairly effective at protecting UK markets from:
(2022/23) Source: FCA and Practitioner Panel survey |
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Metric AMA1-M02: Increase in cleanliness of UK markets (compared to other markets) as perceived by market participants Baseline Value: 47 % of firms believe that market abuse is a big or fairly big issue in the UK 37% of firms believe market abuse is not a very big issue or an issue at all in the UK. 42% of firms believe that the FCA has been better in combatting market abuse in the UK compared to regulators in other global markets and 2% believe the FCA has been worse. 22% believe about the same. (2022/23) Source: FCA and Practitioner Panel survey |
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|
Confidence |
Timely and accurate disclosure of corporate information |
Metric AMA2-M01: Reduction in the number of FCA market oversight actions for potential failure of listed companies to disclose properly Baseline and latest value: This metric is the same as the topline metric for Wholesale Markets Fair Value – see WFV1-M02 |
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Confidence |
Financial firms and issuers are more resilient to market abuse, having robust systems and controls, high- quality reporting practices and a strong anti-market abuse culture. |
Metric AMA3-M01: Decrease in values of our market cleanliness (MC) statistics. The MC statistic is one indicator of possible insider dealing, but it has several limitations as a measure of broader market cleanliness, especially given the fall in sample size over the past decade Baseline value: This metric is the same as the topline metrics for Wholesale Markets Confidence – see WCO2-M02 and the Strategic Transformation metric STO2-M01 Latest value: See topline metrics for Wholesale Markets Confidence – WCO2-M02 and the Strategic Transformation metric STO2-M01 Source: FCA market cleanliness statistics, calculated from FCA transaction data and prices from data vendors |
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Confidence |
Criminal, civil and supervisory sanctions are brought to bear on wrongdoers to provide effective deterrents |
Metric AMA4-M01: Increase in enforcement actions Baseline value: Enforcement outcomes against regulated firms for failures in market abuse systems and controls – 0 Enforcement outcomes against listed issuers - 1 Enforcement action against individuals for insider dealing -0 Disruption events - Accounts closed where these were being used to commit market abuse – 221 (2021/22) Source: FCA data Latest data: Enforcement outcomes against regulated firms for failures in market abuse systems and controls – 3 Enforcement outcomes against listed issuers - 0 Enforcement action against individuals for insider dealing -5 (charging stage) Disruption events - Accounts closed where these were being used to commit market abuse – 156 (2022/23) Source: FCA data |
4.7. Putting consumers' needs first
The Consumer Duty (the Duty) sets a higher expectation for the standard of care that firms provide to consumers across retail markets. As firms embed the Duty, this will have a positive impact on consumer outcomes.
The Duty is at the heart of the FCA’s ‘Putting Consumers’ Needs First’ strategic priority and comes into force on 31 July 2023 for new/existing products and services — and on 31 July 2024 for closed products and services.
In advance of these deadlines, we are ensuring alignment of our supervisory approach to the Consumer Duty’s focus on good consumer outcomes and are supporting firms as they embed the Duty.
We expect the Duty to have an immediate positive impact on consumer outcomes, however, it is likely to take time to see the positive impacts of the Duty feed through to consumer outcome metrics, particularly reduced complaints which are by nature a lagging indicator.
We monitor 7 outcomes for this commitment, with 10 metrics. We use Financial Ombudsman Service complaints data (metrics: CNF1-M01, CNF2-M01, CNF4-M01, CNF7-M01), to monitor progress towards several of our outcomes. We ultimately expect the proportion of upheld complaints to decrease when customers get:
- suitable information
- advice
- products
Some of the metrics reflect Financial Lives survey (FLS) questions (CNF2-M02, CNF4-M02, CNF5-M01, CNF5-M02), and shouldn’t be read as substituting the standards we expect of firms in our Rules and Guidance.
For example, in relation to fair value, the term ‘completely unreasonable’ is used for the purposes of questionnaire design. It does not represent the threshold for what we perceive as fair value.
We’ll continue to work with government and wider partners to support financial inclusion within financial services. We’ll work towards the outcome of maintaining appropriate access to financial services and measure progress towards this (metric CNF6-M01) which reflects our current focus on maintaining reasonable access to cash.
In response to the impact of cost-of-living increases, from 2023/24, we’re also including a new outcome we want to achieve, to help ensure firms support consumers to sustainably manage their debts. While we expect the number of consumers experiencing financial difficulty to increase due to cost-of-living pressures, we aim to make sure consumers get the support they need to relieve avoidable added difficulty.
To monitor progress towards this, we have introduced a new metric (CNF7-M01). This measures the number of upheld Financial Ombudsman Service complaints about the treatment of customers experiencing financial difficulties.
This metric reflects additional activities we’re doing in response to the impact of cost-of-living increases on people, focussing on making sure firms support consumers to sustainably manage their debts.
We expect to see the uphold rate for relevant complaints to remain at least steady, or preferably reduce over time. However, we recognise the overall number of complaints may increase due to more consumers experiencing difficulties overall.
Find out more about the Financial Lives survey data and the Financial Ombudsman Service data.
What the latest metric values tell us
The Consumer Duty comes into force on 31 July 2023 for open products and services. We expect to see positive impacts on our metrics over time as firms embed the requirements of the Duty and deliver against the outcomes.
Where we have updated values, we will therefore consider these together with any baseline values we published last year in measuring the future impact of our work.
For metric CNF1-M01, the average proportion of upheld Financial Ombudsman Service complaints for recent events about unsuitable advice or mis-sold products and services has decreased.
While too early to identify any trend from the data, this reduction could have been influenced by our historical interventions around the mis-selling of PPI, with firms less likely to mis-sell as a result.
Together with the Consumer Duty, we anticipate our increased interventions to tackle mis-leading or unclear financial promotions will positively influence these figures in time.
The proportion of upheld Financial Ombudsman Service complaints arising from recent events about:
- charges
- fees
- commissions (metric CNF2-M01)
remained similar.
However, there was an increase in consumers stating that they had been offered a product or service in the last 2 years at a price or with terms and conditions they felt were ‘completely unreasonable’, when surveyed in May 2022 (metric CNF2-M02).
This may have been influenced by cost-of-living pressures and resulting perceptions of fair value. We will monitor these metrics to assess the impact of the Consumer Duty in delivering good outcomes specifically in relation to price and value.
In relation to customer service and support, compared to the baseline values, the latest data doesn’t indicate a substantial change in terms of the proportion of upheld complaints (metric CNF4-M01) or consumers telling us they have encountered problems (metric CNF4-M02).
However, there were significant shifts observed among day-to-day account holders (decrease) and savings product holders (increase). We will monitor these metrics to assess the impact of the Consumer Duty in delivering good consumer outcomes specifically in relation to customer support.
Consumers’ confidence in the financial services industry overall, together with perceptions of honesty and transparency, remained broadly steady when surveyed in May 2022 compared to 2020 (metrics CNF5-M01 and CNF5-M02), but confidence in the financial services industry was lower among vulnerable consumers in 2022.
Cost-of-living pressures are likely to reduce consumer confidence – particularly for vulnerable consumers – and we may see this reflected in the data in the short-term.
This highlights the importance for firms to fully embed the Duty in a timely way to deliver good outcomes for retail customers. We also expect our work to make sure firms support consumers to sustainably manage their debts will help to mitigate cost-of-living impacts for those experiencing difficulties.
For metric CNF6-M01, our data shows that most people currently have reasonable access to cash through a combination of bank, building society, or Post Office branches and ATMs.
We’ll continue to monitor this as part of our work with the Government and other stakeholders to protect access to cash and to support financial inclusion more widely.
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Consistent Topline Theme |
Outcomes |
Metrics |
|---|---|---|
|
Suitability and treatment |
Consumers are sold products and services that are designed to meet their needs and characteristics |
Metric CNF1-M01: Reduction over time in upheld Financial Ombudsman Service complaints about unsuitable advice or mis-sold products and services Baseline value: See Metric CST1-M02 Latest value: See Metric CST1-M02 Source: FCA analysis of Financial Ombudsman Service data
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Fair value |
Consumers get products and services which are fair value |
Metric CNF2-M01: Reduction over time in upheld Financial Ombudsman Service complaints about charges, fees and commission and premium pricing Baseline value: 2785 upheld complaints, 32% uphold rate (2021) (complaints with any event date) 1375 upheld complaints, 28% uphold rate (2021) (complaints with event date in 2020 or 2021)
Latest Value: 2241 upheld complaints, 32% uphold rate (2022) (complaints with any event date) 1032 upheld complaints, 26% uphold rate (2022) (complaints with event date in 2021 or 2022) Source: FCA analysis of Financial Ombudsman Service data |
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Metric CNF2-M02: Reduction in the proportion of consumers, including those in vulnerable circumstances, who, in the last 2 years, have been offered a financial product or service they wanted, but at a price, or with terms and conditions, they felt to be ‘completely unreasonable’ We use ‘completely unreasonable’ as it is the question wording in the survey; it doesn’t represent a threshold of what we perceive as fair. We also recognise that the question is asking consumers about their experiences in the past 2 years, so it will take time to show any changes that will result from our work. Baseline value: 7% of consumers (8% vulnerable, 5% not vulnerable) (2020) Latest value: 10% of consumers (10% vulnerable, 9% not vulnerable) (2022) Difference between 2020 and 2022 is statistically significant Source: FCA FLS See Metric CFV1-M01 |
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Suitability and treatment |
Consumers understand the information they are given and make timely and informed decisions as a result |
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Suitability and treatment |
Firms provide consumers with good customer support
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Metric CNF4-M01: Reduction over time in upheld Financial Ombudsman Service complaints about administration or customer service, account access, delays and terminations, account closure, cancellation of policies Baseline value: 12,830 upheld complaints, 32% uphold rate (2021). (complaints with any event date) 9,668 upheld complaints, 32% uphold rate (2021) (Complaints with event date in 2020 or 2021) Latest value: 13,092 upheld complaints, 33% uphold rate (2022). (Complaints with any event date) 9,026 upheld complaints, 32% uphold rate (2022) (complaints with event dates in 2021 or 2022) Source: FCA analysis of Financial Ombudsman Service data
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Metric CNF4-M02: Maintain or reduce the proportion of consumers (with product(s) in that sector), including those in vulnerable circumstances, who have had a problem with a product in the last 12 months and the problem relates to: sales pressure (for consumer credit: pressure to take on additional credit), poor customer service, IT system failure/service disruption, provider errors/not following instructions, delays when making changes to an account, delays when arranging an account, and/ or unsuitable channel (phone, online, face to face) to contact the provider Baseline value: 2020
Latest value: 2022
Difference between 2020 and 2022 is statistically significant for retail banking (apart from non-vulnerable consumers) and savings products. Source: FCA FLS |
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Confidence/ Sustainable growth |
Consumers have confidence in financial services markets |
Metric CNF5-M01: Increase the proportion of consumers, including consumers in vulnerable circumstances, who slightly or strongly agree that they have confidence in the UK financial services industry Baseline value: 41% of consumers (35% vulnerable, 47% not vulnerable) (2020) Latest value: 41% of consumers (33% vulnerable, 49% not vulnerable) (2022) Source: FCA FLS See Metric CCO1-M01 and PFS1-M01 |
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Metric CNF5-M02: Increase the proportion of consumers, including consumers in vulnerable circumstances, who slightly or strongly agree that most financial firms are honest and transparent in the way they treat them Baseline value: 34% of consumers (29% vulnerable, 39% not vulnerable) (2020) Latest value: 36% of consumers (29% vulnerable, 41% not vulnerable) (2022) Difference between 2020 and 2022 is statistically significant (apart from those consumers who have characteristics of vulnerability) Source: FCA FLS |
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Access |
Appropriate access to financial services is maintained |
Metric CNF6-M01: Continued tracking of access to cash. We’ll report our findings until the Government legislates and a level of cash access has been set for us to monitor against Current data: Access to any bank, building society, Post Office branch, or any ATM (either free or pay-to-use): 95.7% of the UK population are currently within 2km of a cash access point 99.7% of the UK population are currently within 5km of a cash access point (2021, Q3) Source: FCA and PSR data request Access to cash coverage in the UK 2021 Q3 96.5% the UK population are currently within 2km of a cash access point 99.8% of the UK population are currently within 5km of a cash access point Source: FCA and PSR data request |
| Suitability and Treatment |
Firms support consumers to sustainably manage their debts |
Metric CNF7-M01: The uphold rate of Financial Ombudsman Service complaints about the treatment of customers experiencing financial difficulties is maintained or reduced Baseline value: 32% uphold rate (278 upheld complaints) (2020) 35% uphold rate (548 upheld complaints) (2021) 24% uphold rate (475 upheld complaints) (2022) |
4.8. Enabling consumers to help themselves
Digital services make it faster and easier than ever for consumers to engage in financial services or undertake any financial services activity. Consumers need good information to make good decisions – particularly in a challenging economic environment.
But this doesn’t always happen. Instead, they’re often targeted with adverts that are unclear, unfair, misleading or illegally communicated by unauthorised persons.
Non-compliant or illegal financial promotions can lead to a range of consumer harms including unsuitable purchases and financial losses. Our outcomes are to make sure the potential for these harms to occur is reduced.
To track progress against these outcomes, we use operational metrics that track our input into delivering them. Our work on financial promotions is closely linked to the outcomes on other commitments – for example, Reducing and preventing financial crime, and should be considered alongside those.
Our metric related to the number of interventions on non-compliant financial promotions (IHT1-M01) refers to the use of regulatory tools to mitigate potential, or actual harm, to consumers and markets.
An increase in interventions indicates that we’re more effectively able to address promotions that are likely to lead to mis-selling and financial losses. We anticipate an increase over the next 1-2 years, followed by a flattening.
A rise in our metric on the number of warnings placed on our website (IHT2-M01) signals that we’re more effectively able to address activity by unauthorised entities that has the potential to lead to mis-selling and financial losses. As with our other interventions, we anticipate an increase over the next 1-2 years, followed by a flattening.
Our metric (IHT3-M02) relates to the number of consumers investing in high-risk investments (HRIs) who have a low risk tolerance or who demonstrate characteristics of vulnerability.
We’ve also included metric IHT3-M03 which considers consumers’ tolerance to investment risk specifically. A reduction in these measures indicates that our interventions are helping to make sure consumers invest in products better suited to their needs and circumstances.
For further information on metric IHT3-M01 which looks at reported investment fraud volumes and losses, please see the Reducing and preventing financial crime section.
What the latest metric values tell us
Historic lows in consumer confidence may cause consumers to lose trust in mainstream financial services providers. This lack of trust could increase the risk to consumers from harmful financial promotions (both legitimate and scams).
However, we have significantly increased our interventions in this area. For example, for metric IHT1-M01 — supported by better data and technological support — we have significantly increased our intervention activity. We required the withdrawal or amendment of 14 times more non-compliant financial promotions in 2022 than in 2021.
For metric IHT2-M01, we’ve improved our ability to proactively identify illegal financial promotions and have issued 34% more warnings than in 2021.
For metric IHT3-M01, while there were 3.5% fewer victims of investment fraud in 2022 compared with 2021, losses were up by 6.8%. This increase in losses is considerably less than reported between 2020 and 2021 when there was a 53% increase.
Victims reporting to Action Fraud tend to be people who have experienced higher losses than average. Smaller losses are more likely to be reported to banks and picked up in Authorised Push Payment (APP) fraud data.
It remains a challenge to measure our direct impact on fraud trends given the wide-ranging drivers of fraud and array of parties who can affect its prevalence and impact on victims. For further information, go to the Reducing and preventing financial crime section.
For metric IHT3-M02, there’s been no significant change in the proportion of consumers who say they hold high risk investments whose general tolerance to risk is very low or who demonstrate characteristics of vulnerability.
However, overall ownership of high-risk investments (HRIs) has grown among the general adult population. This includes consumers who have low risk tolerance or demonstrate the characteristics of vulnerability. A total of 4% of UK adults stated that they held high-risk investments in 2020, growing to 11% in 2022.
We have introduced new rules for HRIs to help make sure that consumers fully understand the risks involved before investing.
In the future, cost-of-living pressures and our policy interventions may decrease demand for HRIs. On the other hand, declines in mainstream investment markets and income pressures may drive more consumers to seek higher returns through HRIs.
We will monitor to assess whether the increase in ownership is sustained, taking action where needed.
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Consistent Topline Theme |
Outcomes |
Metrics |
|---|---|---|
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Suitability and treatment |
Reduce the potential for consumer financial losses arising from mis-selling of products due to the issuing of non-compliant financial promotions by authorised entities |
Metric IHT1-M01: An increase in the number of interventions on non-compliant financial promotions by authorised firms Baseline value: 573 interventions (2021) Latest value: 8,582 interventions (2022) Source: FCA data |
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Suitability and treatment |
Reduce the potential for consumer financial losses and mis-selling of products due to the issuing of illegal financial promotions by unauthorised entities |
Metric IHT2-M01: An increase in the number of warnings on our website relating to unauthorised entities Baseline value: 1,410 warnings (2021) Latest value: 1,882 (2022) Source: FCA data |
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Suitability and treatment /Confidence |
Reduce the potential for financial loss from scams and the mis-selling of high-risk non-standard investments involving authorised firms |
Metric IHT3-M01: Reported investment fraud victims and losses Baseline values: 20,674 total reported victims, £542.1m total reported losses (2020) 26,482 total reported victims, £832.5m total reported losses (2021) Baseline has been updated to reflect revised figure published by NFIB. Between 2020 and 2021 there was a 28% growth in reported victims and 53% growth in losses. Latest values: 25,558 total reported victims, £888.8m total reported losses (2022) Between 2021 and 2022 there was 3.5% reduction (ie negative growth) in reported victims and 6.8% growth in reported losses. This metric is the same as the topline metric for Consumer Confidence – See CCO3-M03 and metric PFC1-M01 under Reducing and preventing financial crime.
Metric IHT3-M02: Reduction in the proportion of consumers investing in high-risk investments (HRIs) whose general tolerance to risk is very low or who demonstrate characteristics of vulnerability Baseline values: 43% of consumers with high-risk investments have a very low general tolerance for risk or demonstrate at least one characteristic of vulnerability (2020) Latest value: 44% of consumers with high-risk investments have a very low general tolerance for risk or demonstrate at least one characteristic of vulnerability (2022) Source: FCA FLS Metric IHT3-M03: Reduction in the proportion of consumers investing in high-risk investments (HRIs) whose tolerance to investment risk is very low or who demonstrate characteristics of vulnerability Baseline value: 52% of consumers with high-risk investments have a very low general tolerance for risk or demonstrate at least one characteristic of vulnerability (2022) Source: FCA FLS
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4.9. Our environmental, social and governance (ESG) priorities
Through the FCA Strategy and the environmental, social, and governance (ESG) Strategy we published in November 2021, we are strengthening our focus on ESG-related issues.
We want to improve the climate- and sustainability-related disclosures to markets to:
- aid market pricing and decision making
- increase consumer trust
- enhance active investor stewardship
to influence companies’ sustainability strategies.
We have identified target outcomes and we’re continuing to build specific metrics to accompany them.
Some of the outcomes are non-financial – they focus on perception and trust, the quality of disclosures and similar. This has presented challenges in designing and implementing metrics — and we don’t have a pre-existing baseline against which to assess them. We’ll use the following to measure progress:
- survey data – eg information on whether consumer trust in the markets for ESG investments is changing
- intelligence from engagement – eg feedback on whether misleading marketing is declining
- case data (where relevant) – eg on the frequency of supervisory interventions or enforcement action
We expect our continuing work on:
- Sustainability Disclosure Requirements and investment labels
- along with our regulatory interventions
- work with international partners to promote effective global sustainability reporting standards
will have a positive impact on the quality of disclosures and on consumer trust in ESG products in future. However, particularly with respect to enhancing trust, it may take time for the actions we’re taking to be reflected in a change in our metrics.
What the latest metric values tell us
For metric NZE1-M01 we’re using data from our review of climate-related financial disclosures by premium listed commercial companies.
We found that the level of detail in a company’s disclosures and consistency with the Task Force on Climate-Related Financial Disclosures’ (TCFD) guidance were often correlated with the extent to which that company had identified climate change as a principal or emerging risk in their Annual Financial Report (AFR).
Therefore, we’re using the average page length of disclosures in the AFRs and self-reported levels of consistency with the TCFD framework as indicators of the thoroughness and completeness of disclosures.
An increase to average page length could indicate a material improvement in both the completeness of reporting and consistency with the TCFD’s recommended disclosures.
However, we recognise that this is not a perfect measure and so it is just one part of our assessment: it acts as a complement to our broader, qualitative assessment work (for example, examining the level of detail in a company’s disclosures and consistency with TCFD).
For 2022 AFRs, we found the average page length of disclosures was 5 pages and that over 90% of companies included a recognisable statement indicating whether they’d made climate-related financial disclosures consistent with the TCFD framework.
We’ll use this data as the baseline for monitoring disclosures in future – while considering the development of additional qualitative metrics.
For metric NZE2-M02, we’re using data from our 2022 Financial Lives survey (FLS). We found that consumers who have invested ‘responsibly’ are susceptible to greenwashing: 76% agreed they find it hard to tell which funds genuinely follow responsible investment principles.
A total of 53% of consumers who have invested ‘responsibly’ agreed they received enough information to assess how responsible the fund was.
We’ll use this data as the baseline for future monitoring of investor confidence. We’re considering new questions to be included in future FLS surveys to gather further baseline values.
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Consistent Topline Theme |
Outcomes |
Metrics |
|---|---|---|
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Fair Value (consumers and wholesale markets) |
High-quality climate- and wider sustainability-related disclosures to support accurate market pricing, helping consumers and market participants choose sustainable investments and drive fair value. |
Metric NZE1-M01: Increase in quality and quantity of climate-related and sustainability disclosures (metric for quality to be determined) Baseline values: Average page length in AFRs – 5 pages (2022) 90% of companies included a statement in their AFR (2022) Source: FCA/FRC review of climate-related financial disclosures by premium listed commercial companies |
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Confidence |
Trust and consumer protection from misleading marketing and disclosures around ESG-related products. |
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Metric NZE2-M02: Increase in consumer trust of ESG related products Baseline values: 76% of consumers, who have any investments or a DC pension in accumulation or decumulation, and have invested responsibly with their pension savings or other investments, agree they find it hard to tell which funds genuinely follow responsible investment principles 53% of consumers, who have any investments or a DC pension in accumulation or decumulation, who have invested responsibly with their pension savings or other investments, agree they received enough information to assess how responsible the fund was (2022) Source: FCA FLS |
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Metric NZE2-M03 under development: Monitor Enforcement and Supervisory cases of financial crime, fraud, and mis-selling of ESG related products
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Confidence |
Active investor stewardship that positively influences companies’ sustainability strategies, supporting a market-led transition to a more sustainable future. |
Metric NZE3-M01 under development: We are working with industry leaders and other regulators to decide how to develop indicators for the effectiveness of stewardship
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4.10. Minimising the impact of operational disruptions
Operational disruptions can prevent consumers accessing essential financial services, disrupt markets and threaten confidence in the sector. Firms continue to face a high – and growing – level of cyber threats and operational resilience risks, against a complex geopolitical backdrop.
Firms should be investing in their resilience because of the increasing scale and complexity of both current and future threats. They must be able to prevent and respond to disruptions.
We recognise that operational disruptions are inevitable. Our aim is to reduce their impact on consumers and markets. To do this, we’re seeking to make sure that the important business services provided by firms are resilient to operational disruption.
To measure our success, we’ve committed to develop a new metric (IOD1-M01) to assess the impact of disruptions based on their scale and severity. This includes time taken to remediate. This metric is being developed. We expect data to be available for publication during Summer 2023.
We’ve also introduced new questions on the FCA and Practitioner Panel survey to gauge firms’ awareness of our work to improve operational resilience and the actions they have taken because of this (IOD1-M02).
In the meantime, we continue to monitor the overall number of operational incidents reported to us (metric CAC1-M01 and metric WAC1-M01).
We’re also working to strengthen our operational incident reporting regime. This is to make it clearer to firms what they should report to us. This work will give us greater visibility of incidents of which we might previously have been unaware. As a result – in the short-term – it’s possible that we’ll see an increase in disruptions reported to us.
Over the medium term (year 3 and beyond), we then expect that reported incidents will reduce as firms improve their operational resilience.
Many factors which contribute to the occurrence of incidents are outside our control. For example, the ongoing conflict in Ukraine has raised the threat level of cyber-attacks affecting UK firms. It isn’t possible to factor out these risks from our metric. But with that understood, our goal is to minimise disruptions to consumers and markets from these operational incidents.
What the latest metric values tell us
For metric CAC1-M01 and WAC1-M01, the number of operational disruptions reported to the FCA in 2022 has very slightly declined compared to 2021. It has decreased from 793 (2021) to 785 (2022).
There was a slight increase in the number of disruptions impacting wholesale markets firms (+3). However, incidents affecting consumer firms decreased by 11.
Alongside our work on firms’ operational resilience, we’re also seeking to make sure firms are reporting all relevant disruptions to the FCA and strengthening the overall reporting regime for operational disruptions.
Additionally, during 2022, firms and their supply chains experienced periods of heightened cyber risk because of events, such as the Russian invasion of Ukraine. These were likely to increase the number of disruptions reported to us.
For metric IOD1-M02, 88% of firms have told us that they are aware of our work in this area. A total of 57% of firms say operational resilience has become more of a priority for their firm over the past 12 months. These are new questions we have included in the 2022/23 FCA and Practitioner Panel survey. We will use this as a baseline to monitor progress.
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Consistent Topline Theme |
Outcomes |
Metrics |
|---|---|---|
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Access |
Important business services provided by firms are resilient to operational disruption |
Metric IOD1-M01: Reduction in impact (scale, severity, time to remediate) of operational disruptions to firms’ important business services, as measured by FCA Technology, Resilience & Cyber Department Baseline value: [Expected summer 2023] Source: FCA |
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Metric IOD1-M02: Maintain awareness of the FCA’s work to ensure firms are operationally resilient Increase the proportion of firms who, over the past 12 months, say operational resilience has become more of a priority Baseline values: 88% of firms are aware of the FCA’s work to ensure firms are operationally resilient 57% of firms say operational resilience has become more of a priority over the past 12 months FCA and Practitioner Panel survey (2022/23)
While this metric was being developed, we monitored the overall number of operational incidents (metric CAC1-M01 and metric WAC1-M01) Metric CAC1-M01 Baseline value: 599 incidents – Consumer firms (2021) Latest value: 588 incidents – Consumer firms (2022) Metric WAC1-M01 Baseline value: 194 incidents – Wholesale markets firms (2021) Latest value: 197 incidents - Wholesale markets firms (2022) Source: FCA |
4.11. Preparing financial services for the future
We now have the freedom to tailor our rules to better suit UK markets. The outcomes of the Treasury’s Future Regulatory Framework Review (FRF) will change the statutory and regulatory framework that we operate in.
The Financial Services and Markets Act 2023 gives us greater powers to set rules and regulate in a way that is properly adapted to the needs of UK firms, markets and consumers. We have an important role in implementing the new framework so that it is fit for the future.
This work supports all our topline outcomes and focuses on creating confidence in financial markets. When any legislative changes have been fully implemented, we’ll measure our success by how effectively we respond to any change in our remit, accountability arrangements or wider obligations and how we embed firm facing requirements from legislation into our rules.
We’re focused on metrics that reflect the way firms and consumers have confidence in the FCA (PFS1-M02) and the UK financial system (PFS1-M01). These metrics are clearly affected by many other factors and will take time to reflect the impact of our work, for example, the impacts of changes we may make as we replace retained EU law (REUL) with rules in our Handbook.
We’ll also consider other ways of assessing the effectiveness of our work in this commitment.
What the latest metric values tell us
While we’ve carried out significant work on the preparing financial services for the future commitment, much of our work has yet to take effect and it’s too early to expect an impact on the metrics for this commitment at this stage.
In particular, the Financial Services and Markets Act 2023 has only recently received Royal Assent, the changes to our statutory and accountability framework are yet to take effect and replacing, where appropriate, repealed REUL with FCA rules is at an early stage.
Where we have updated values, we will therefore consider these together with any baseline values we published last year in measuring the future impact of our work. Specifically, for metric PFS1-M01, when surveyed in May 2022 the percentage of consumers who have confidence in UK financial services remained steady overall compared to 2020.
For metric PSF1-M02 though, market participants’ perceptions of our effectiveness decreased slightly in the latest 2022/23 FCA and Practitioner Panel survey, compared to 2021.
Both consumer and firm sentiments may have been influenced by the challenging macro-economic and wider market environment. While some of these factors will remain beyond our control, our work under this commitment is aimed at using our powers under the new Act to appropriately adapt regulation to support UK consumers’, firms’ and markets’ needs.
Reflecting this aim, we included an additional new question in the 2022/23 FCA and Practitioner Panel survey asking to what extent firms agreed that we are able to adapt regulatory requirements to respond to innovation and new challenges (metric PSF4-M01). In response, around a third of firms agreed, while 18% disagreed. We’ll use this as a baseline to monitor progress alongside the other metrics.
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Consistent Topline theme |
Outcomes |
Metrics |
|---|---|---|
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All topline outcomes, but particularly Confidence and Sustainable growth |
The commitment supports all of our topline outcomes and creates confidence in financial markets |
Metric PFS1-M01: In the longer term, once any legislative changes have been fully implemented, increase in the proportion of consumers who slightly or strongly agree that they have confidence in the UK financial services industry. Baseline value: 41% of consumers (2020) Latest value: 41% of consumers (2022) Source: FCA FLS This metric uses the same data as the topline metrics for Consumer Confidence – see CCO1-M01 and Putting consumer needs first – see CNF5-M01 |
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Metric PFS1-M02: Increase in firm’s perceived effectiveness of the FCA in regulating financial services Baseline value: scores on a 10-point scale; 7.1 all firms [7.2 (fixed firms) and 7.1 (flexible firms)] (2021) Latest value: scores on a 10-point scale; 6.9 all firms [6.7 (fixed firms) and 6.9 (flexible firms)] (2022/23) Difference between 2021 and 2022/23 is statistically significant. Source: FCA and Practitioner Panel survey section 2.2 Metric PFS4-M01: Firms feel the FCA is able to adapt regulatory requirements to respond to innovation and new challenges Baseline value:
Source: FCA and Practitioner Panel survey section 2022/23 |
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Ensuring orderly replacement of firm-facing requirements in legislation in our Handbook
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We will continue to assess and monitor the regulatory pipeline through the Regulatory Initiatives Forum and Grid, to understand the impact of the transfer on firms. Latest Regulatory Initiatives Grid: Regulatory Initiatives Grid - February 2023 |
4.12. Strengthening the UK’s position in global wholesale markets
We seek a UK wholesale market which supports both the domestic economy and growth while maintaining high standards of consumer protection.
This will be achieved if the UK continues to be regarded as one of the leading global markets of choice for issuers, intermediaries and investors alike when compared to other high-quality markets.
The UK’s position in global wholesale markets is affected by a wide variety of factors. For example, general levels of activity and attractiveness may be affected by wider economic circumstances and market dynamics outside of our control.
However, we’re working to measure how the market perceives our overall regime. This is so we can consistently keep track of market sentiment and understand where our regime could be improved further.
Through the FCA and Practitioner Panel survey, we aim to engage with market participants on their perceptions of our actions (GWM1-M01, GWM2-M02, GWM3-M01) through new questions as well as using existing measures (GWM2-M01).
Due to the long-term nature of our interventions, it may take time before we see the impact of our activities and resulting outcomes through these metrics.
These metrics could be biased by the sample of participants being surveyed through the FCA and Practitioner Panel survey, so we make sure the survey includes a representative sample of market participants. These measures are often also affected by other market and economic factors.
Operationally, metrics such as turn-around times for new and changes in authorisations for wholesale firms, funds, regulated activities and capital markets (GWM3-M02) will indicate if we’re improving our efficiency.
These measures can be affected by overall levels of activity in the market and the quality of applications as well as our efficiency in processing applications.
What the latest metric values tell us
For our metrics measuring wholesale markets firms’ views of the regulatory regime and the FCA’s role, it is important to recognise that these are likely to be influenced significantly by other domestic and international factors, as well as wider current market and economic dynamics.
Some of those headwinds will be challenging in the shorter term and we’ll need to keep a long-term view. In a related example of this and, though driven by various factors, critical media coverage during the latest firm survey period about companies deciding not to list in the UK may have adversely influenced firm sentiment.
For metric GWM1-M01 (perceptions of the FCA’s role and impact), we’re publishing market participant feedback in response to new questions added to the latest 2022/23 FCA and Practitioner Panel survey.
Overall, just over half of wholesale markets firms who responded agreed that our regulatory framework is clear and well understood. Just under 1 in 5 firms disagreed. Views were generally positive about whether our regulatory framework is trusted – with slightly more firms agreeing and fewer firms disagreeing.
Likely reflecting the impact of the challenging wider dynamics mentioned above, a third of firms felt that the UK’s position in wholesale markets had weakened in 2022/23. A third felt it had stayed the same and only 7% felt it had got stronger. As far as the FCA’s influence however, firms generally felt that our actions had a positive impact on the UK’s position.
We’ll use these as baseline values for monitoring this metric in future.
We expect our continuing work with Government on the Wholesale Markets Review — as well as our work on reforming the UK’s listing regime as part of our major review of primary markets regulation — to support strengthened understanding, trust and market competitiveness in the longer term.
We also continue to make clear our supervisory expectations, for example through the portfolio letters we published in 2022/23 for:
- asset management firms
- alternative investment funds
- data reporting service providers
- repositories
- benchmark administrators
Together with taking enforcement action against firms for market abuse systems and controls failures, these activities should make sure the regulatory framework is clear, well-understood and trusted by market participants. This should be reflected in further strengthened perceptions of our effectiveness.
For metric GWM2-M02 (strengths of the UK’s regulatory regime), we’re also publishing market participant feedback in response to new questions added to the latest 2022/23 FCA and Practitioner Panel survey.
Overall, around two thirds of wholesale markets firms agreed that we’re effective in regulating and ensuring the integrity of wholesale markets, with only 3% disagreeing. We’ll use these as baseline values for monitoring this metric in future.
In the longer term, we expect our work:
- supporting innovation
- improving access to market data for all market participants
- providing international thought leadership
will have a positive impact.
This includes developing a Financial Market Infrastructure (FMI) Sandbox with the Bank of England and the Government to support the adoption of new technologies, completing our wholesale data market study, and our work to operationalise the Overseas Fund Regime in collaboration with Treasury.
For metric GWM3-M01 (the proportionality of the regulatory regime), we’re again publishing market participant feedback in response to new questions added to the 2022/23 FCA and Practitioner Panel survey.
Around half of wholesale market firms agreed that our regulation supported participants in determining fair value and was proportionate in terms of benefits and costs, with a bit more than a quarter of firms neither agreeing or disagreeing.
Only 3% (fair value) and 6% (proportionate) disagreed. We’ll use these values as baseline values for monitoring this metric in future. We expect our work to remove barriers to listings and our reforms to secondary markets regulation to have a positive impact in future.
For metric GWM3-M02 (Increased proportion of cases meeting gateway turnaround targets), we’ve updated figures to include 2022/23 performance data for voluntary standards for Listing Transactions. For further information please see our Operating Service Metrics 2022/23 report.
In future, we’ll also monitor how well we’re meeting our Authorisations service standards. We expect our work underway to improve the Authorisations process through enhancements to our triage process to have a positive impact on this metric.
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Consistent Topline Theme |
Outcomes |
Metrics |
|---|---|---|
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Confidence |
The regulatory framework is clear, well-understood and trusted by all market participants. The framework supports market participants determining fair value. Where outcomes are not being met, this is clearly communicated, and remediation is swiftly undertaken or enforced. |
Metric GWM1-M01: Increase in perceived effectiveness of FCA’s role and impact in regulation of the wholesale markets Baseline value: The regulatory framework is clear and well understood by all market participants:
The regulatory framework is trusted by all market participants:
Over the past 12 months the UK’s position in wholesale markets has:
Impact of the FCA’s actions on the UK’s position in wholesale markets during this time (on a scale of 1=significant negative impact to 10=significant positive impact): Mean score: 6.3 FCA regulation supports market participants determining fair value in wholesale markets
(2022/23) Source: FCA Practitioner Panel survey |
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Access/ Sustainable growth |
The UK is regarded by market participants as one of the top markets of choice, with innovation viewed as encouraged and supported, and regulation viewed as appropriately evolving to address new opportunities and risks |
Metric GWM2-M01: Working with partners, maintain the UK’s top 5 position in the New Financial global financial centres index This measures the overall financial activity across all sectors and considers a number of qualitative factors related to overall economic performance It ranks different jurisdictions based on these factors Baseline value: UK is ranked second in this index (June 2021) |
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Metric GWM2-M02: Increase in perception of market participants on the strengths of the regulatory regime in the wholesale markets Baseline value: The FCA is effective in regulating wholesale markets.
FCA regulation ensures the integrity of wholesale markets:
(2022/23) Source: FCA Practitioner Panel survey |
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Access/ Sustainable growth |
Market participants regard the regulatory framework as proportionate both in terms of speed and cost |
Metric GWM3-M01 under development: Increase in perception of market participants on the proportionality of the regulatory regime in the wholesale markets Baseline value: FCA regulation in wholesale markets is proportional in terms of the benefits versus the costs:
(2022/23) Source: FCA Practitioner Panel survey |
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Metric GWM3-M02: Increased proportion of cases meeting authorisation turnaround targets for wholesale funds, regulated activities, and capital markets Baseline value: Listing Transactions voluntary standards met: New issuer: First response within 10 days
Existing issuer: First response within 5 days
New issuer: subsequent proof response within 5 days
Existing issuer: subsequent proof response within 3 days
Other queries within 5 days
Latest value: New issuer: First response within 10 days
Existing issuer: First response within 5 days
New issuer: subsequent proof response within 5 days
Existing issuer: subsequent proof response within 3 days
Source: FCA operating metrics |
4.13. Shaping digital markets to achieve good outcomes
The digitalisation of financial services is changing the way consumers make decisions and markets operate. To be an effective regulator, we must both respond to today’s challenges and prepare for those of tomorrow.
We need to understand the emerging risks and opportunities better. This is so the huge benefits from greater competition and innovation are realised and the harms to consumers mitigated.
Metrics will be developed to assess the effectiveness of our approach as the work progresses (SDM1-M01). In the meantime, we have introduced a metric (SDM3-M01).
This metric measures from firms’ perspective the perceived effectiveness of the FCA at supporting:
- the development of digital markets
- new technologies in financial services
using the FCA and Practitioner Panel Survey.
We recognise the actions we take may take time to reflect in this measure. And perceptions may also be influenced by the pace of technological change and adoption and what is happening in other markets.
For example, in situations where technological development happens especially rapidly, more time is needed to properly assess the regulatory implications to effectively protect consumers.
We are also considering how best to measure our effectiveness in addressing digital ‘sludge’ (SDM1-M01). Harmful digital choice architecture, or poor user experience (UX), can create barriers which make it difficult for consumers to make decisions that are in their best interest and for them to receive fair value.
For example, a firm may not clearly signpost the process for product cancellation on its website. This makes it harder for its customers to switch. (For further description of sludge practices, see the Consumer Duty guidance.)
A reduction in the instances where the digital design, and UX, is considered by us to be harmful, will lead to more consumers receiving fair value.
What the latest metric values tell us
For metric SDM3-M01, we’re publishing firm feedback in response to the following new question introduced in the latest 2022/23 FCA and Practitioner Panel Survey. 'To what extent do you agree or disagree: The FCA is effective at supporting the development of digital markets and new technologies in financial products and services?'
A total of 31% firms said they agreed we were effective while 9% disagreed, with 42% neither agreeing or disagreeing and 17% saying they didn’t know.
We’ll use this as a baseline for monitoring firms’ views of our effectiveness in future. In the longer term, we expect our continuing work with partners developing a pro-competitive regime for digital markets and leading regulatory thinking on the use of Artificial Intelligence (AI) in UK financial services will help improve perceptions.
As well as our policy work, the FCA’s wider innovation support services for firms should also positively influence this metric. For example, the FCA Digital Sandbox will become permanent during 2023 following successful pilots.
For metric SDM2-M01, our investigation into harmful digital consumer journeys led to supervisory action against several firms. We highlighted the importance of making sure sludge practices are identified and remedied in the portfolio letter we sent to c700 firms providing high-cost lending products.
We’ll review the effectiveness of our actions at reducing sludge – and other harmful design features at an appropriate point in the future – once these actions have had time to take effect.