Eating your regulatory greens: a balanced strategy to support financial services

Introduction

Today is National Eat Your Vegetables Day.  

No, you haven’t walked into a speech today from the Food Standards Agency. This is the FCA, not the FSA. But if you’ve been following FCA speeches over the past couple of years, we have a bit of a thing for food. 

In 2023, we were encouraging you to eat the frog – tackling tricky issues head on with the Consumer Duty[1].  

Last year, we were asking about your appetite for tech and innovation – full-fat, semi-skimmed, or somewhere in between.  

And this year, we’ve rounded out the plate with our new 5-year strategy[2].  

A nutritious 4 a day: 

• Fighting financial crime – the antioxidants. Neutralising the bad stuff, strengthening trust and integrity.
• Being a smarter regulator – the fibre. Clearing out what’s no longer needed, keeping the system moving.
• Supporting sustained economic growth – the carbohydrates. Fuel for firms, consumers and markets to thrive.
• Helping consumers navigate their financial lives – the vitamins and minerals. Vital to health, supporting wellbeing and resilience. 

Good strategy, like good nutrition, is all about balance. The right elements, working together, to support long-term health. 

I’m going to talk you through those different elements this morning. And don’t worry, if all this talk of food is making your mouth water – I’ll try to be finished in time for elevenses. Rumour has it there’s carrot cake. 

I am going to steer clear of delving too deeply into our insurance work. You have Matt Brewis here later for that. 

The 3 Ps

The invite for this conference picked out that, under the new strategy, we will be a proportionate regulator.   

We know that what’s right for a 50,000-person firm is not always the same for a smaller business, which is why we worked with a broad range of stakeholders to get this strategy right. 

Now, I don’t know if the drafter left out the beautiful alliteration of predictable and purposeful deliberately, but there’s a reason we included these other words. 

In order to run your businesses well, you need to know what we are going to do and why – predictable. 

And when we do act, we’ll do so decisively, reflecting all our objectives and in a relentless drive to deliver on the vision set out in our strategy – purposeful. 

We achieved a great deal under our previous, and first, multi-year strategy. 

Our 2022 strategy had 13 super-charged priorities.  Was this too many? To reflect a more focused, streamlined regulator, the new strategy has 4 themes.  

The clear areas where we and the industry need to succeed. 

Growth

It was front of our minds when developing the strategy, and it came through loud and clear in the extensive engagement we did. Growth has always been part of our story as a regulator.  Recently, we’ve delivered once-in-a-generation listing rule changes to launching long-term asset funds.   

But we are going further, and faster. 

Since the Prime Minister’s letter on Christmas Eve, we’ve identified, and started working on, more than 50 ideas to support the Government’s growth mission in the near term. 

We are simplifying rules: relying, for example, on the Consumer Duty to provide protection for consumers.

Stripping outdated requirements from our insurance rule book and simplifying the responsible lending advice rules for mortgages. 

Just last week we opened the application process for firms who want to operate our new, innovative platform for trading shares, Private Intermittent Securities and Capital Exchange System – PISCES[3]. 

Bold reforms come with risk, and we’ve been up-front and open about where we are introducing risk into the system.  

We accept that firms fail, investors lose money. But rebalancing risk is necessary.   

Reward and risk work in tandem. It will unlock investment and growth. We’re a nation losing out because of a risk not taken, an investment not made. 

You may have heard our chief executive, Nikhil Rathi, talking about the importance of our international work during his session with the Treasury Select Committee last week.   

It’s central to his second term and will be a focus for the organisation throughout the next 5 years as we lean in with our international partners. This should be of no surprise to you though.  

You were the original financial services exporters. We have continued to lead the world for insurance ever since Edward Lloyd’s coffee house.   

We’re the biggest global commercial and speciality risk market. Last year, Lloyds had one of its most profitable years in recent history. We want to maintain that position as a truly global financial hub. It benefits the whole country. 

We have always worked through international forums, and we will continue to advocate for global standards where they are needed. The world is changing, and our bilateral relationships help us deliver our priorities.  

Being a smarter regulator

We’ve also put how we operate as a regulator with equal footing, in our strategy. We know that how we work, how we serve you as clients, matters. And we’ve shown we can deliver.  

Complaints about our authorisations and the time taken to process applications used to fill my inbox. Particularly from this sector. 

Now, I barely hear a peep, and I’d like to think this isn’t just because I'm no longer  
executive director for authorisations.   

Our last metrics showed 99.1% of applications were delivered within statutory deadlines. An efficient and effective authorisations service which maintains high standards. 

But there’s more we can do.   

We will support growth by making it easier for new firms to start up and grow. We’re continuing to digitise applications. We are growing our early and high growth oversight area, an initiative that came out of the Kalifa review. 

You told us that data collections weigh heavily on your minds.  The impact of ad-hoc, complex and seemingly unnecessary data requests. So, we are actively reviewing and stopping data collections that we don’t need any more.   

In the first wave, we are switching off 3 regulatory returns, benefiting 16,000 firms.   

We’ve found 3 more we’d like to stop. These include the reporting of general insurance pricing attestations and renewal and insurance assessments.  

We’ve recently launched My FCA, which makes it easier for firms to see their regulatory reporting, attestation tasks and their status, all in one place. 

Working efficiently, reducing burden, making it easier for those who run firms to get on and do that.

Helping consumers navigate their financial lives

Decisions faced by consumers can feel complex. 

I'm not going to hammer home the whys of demographic change, the overall economic environment or the complexity of the financial landscape …  and how these have made decisions about personal finances increasingly difficult in recent years. 

Over 7 million people are struggling to pay their debts, and many would struggle to deal with a financial shock. 

We want to work with government, industry, consumer groups and other partners to help people get the right help and right support they need, when they need it. 

Through innovative ideas, like targeted support for those who are able to invest but cannot afford financial advice.  

Through partnerships with other bodies who are working to address low financial capability. 

Through increasing trust in financial services products, so that people have the confidence to make the right choices for them. 

Early concerns about the outcomes-focused Consumer Duty have been replaced.   
Understanding that by making the Duty fit for your firm, it supports consumers and growth. It’s the foundation of this theme. 

To help protect people from financial shocks and provide properly for their overall financial health, we need growing, well-functioning markets. 

This isn’t an either/or choice.

Fighting crime

Well-functioning, trusted markets.  

Criminals are becoming more sophisticated and orchestrated within financial services.    
That’s why fighting financial crime was a key pillar of our last strategy and remains so today. 

Cross-border, cross-sector crime detection needs increased data sharing across partners, focused cooperation between us and the industry. We must always stay one step ahead of the criminals.  

We’re working with more partners, using technology to better identify scams and abnormal trading, and concluding our enforcement investigations faster.

Conclusion

Unlike broccoli, we haven’t been forced into this strategy by parental bribery or guilt. 

We’ve balanced it – carefully and deliberately – as our regimen for a changing financial world. 

A plan rooted in purpose, focused on outcomes, and designed to use our powers wisely – for smarter risk taking, stronger trust and better outcomes. 

I’m immensely proud of our strategy, the way it was constructed across industry, trade bodies, consumer groups, parliament and more.   

And while I am leaving the FCA, I am not leaving financial services.   

I can speak with certainty that the FCA – the Financial Conduct Authority, the City watchdog – is in the best health to become the critical friend, enforcer of standards and guide that financial services needs.   

Trust and risk: a balanced partnership.