Rolling regulation forwards

Speech by Nikhil Rathi, our Chief Executive delivered at the UK Finance annual dinner.

Speaker: Nikhil Rathi, Chief Executive
Location: UK Finance annual dinner
Delivered: 16 November 2022
Note: this is the speech as drafted and may differ from the delivered version


  • The Consumer Duty will help us manage the entry of Big Tech firms into the UK retail financial service, ensuring a level playing field.
  • Firms should take advantage of digitalisation but market developments must not leave groups of consumers behind, particularly those most vulnerable or the least digitally enabled.
  • We want to work with industry to ensure that the UK remains the largest destination for fintech investment in Europe.

Consumer Duty and the regulatory habitat

Our role as regulators is to help us seize opportunities whilst also navigating the rules of sometimes dangerous terrain or as one commentator wrote recently, the jungle.

Now, let me start by addressing the elephant in the jungle. The Consumer Duty. We know that you have concerns about it. How could we measure it? How could we quantify it? How would we monitor it?

Parliament debated and explicitly mandated the Consumer Duty due to falling public confidence in retail financial services. 

The Duty puts the onus on firms to act to deliver good outcomes for consumers: To act in good faith, avoid causing foreseeable harm and support customers to pursue their financial objectives. We know that the Consumer Duty does not guarantee a good outcome: It leads firms to consider what that looks like and to take decisions in good faith.

Firms must also give customers information that they can understand, point customers to products, services and post-sales support that meet their needs and offer fair value. These principles are not controversial.

Thanks to co-operation and hard work from industry, we hope that we have overcome the biggest stumbling blocks in the design and implementation.

After extensive feedback, we introduced a phased deadline to help firms embed what is undoubtedly a major cultural and operational shift.

Many organisations are already doing much of what we are asking for.

Firms seem to be on track so we see no need for those deadlines to move again. We will remain pragmatic in our oversight of implementation and ask for continued openness from firms on their implementation path.

Listening to industry concerns, we also chose not to attach a Private Right of Action to the duty. Some parliamentarians and consumer groups wanted us to go further but we believe our reforms strike the right balance.

We have been asked how we would measure impact.

We have set ourselves measurable targets such as reducing the number of complaints going to the Financial Ombudsman Service. And we know how critical coordination with the Ombudsman Service will be for successful implementation. As the Ombudsman has made clear, the Duty does not have a retrospective effect. Conduct will be judged on the rules and standards in place at the time. Another quantifiable target is to see an increase in the levels of trust for financial services in our regular survey levy. We want to bring the Financial Services Compensation Scheme down, reducing costs for you, particularly for small businesses.

Ultimately, meeting these targets and embedding the consumer duty are in firms’ interests too. 

And after some heavy lifting upfront, it should also mean fewer reactive rules created by us in the coming years.

We will monitor how the duty is working and look forward to hearing from you about changes we can make to further simplify our rule book.

Fundamentally it sets us up to regulate for the future, and this has never been so important.

Regulation of the future and innovation

And that is what I would like to turn to next.

We want to work closely with industry so that the consumer duty can help shape a framework for use of Artificial Intelligence (AI) and other new technologies.

AI can help solve some of the issues highlighted tonight, such as spotting the signs of vulnerability, tailoring products to individuals and receiving accurate customer feedback and data.

The CEO of a Japanese insurance firm recently said that the data they use can predict the weather and foresee natural disasters, and for consumers spot early signs of dementia, a development which I am sure will be of interest to our fellow guest this evening from the Alzheimer’s Society.

The CEO suggested a future insurance policy would pay out on the first sign of dementia as well as use data to encourage customers to change their lifestyle to stave off its onset for several years.

At a conference hosted by our Dutch colleagues in Amsterdam this year, I heard from a chief technology officer of a major bank who said their firm had piloted an AI tool that could predict with 99% accuracy a customer’s bank balance in a year’s time.

When customers were presented with this innovation, they did not want the product integrated into their banking app.

From masters of the universe to demi-gods of data, financial and Big Tech firms will wield huge power over the direction of our lives.

And we believe the Consumer Duty alongside the Senior Managers’ and Certification Regime will give us the framework to respond quickly to innovations such as this so that new products can be trialled, with informed consent and consumer interests front and centre. The Consumer Duty will also allow us to move more quickly to facilitate new developments, including AI, across sectors. It will help us manage the entry of Big Tech firms into the UK retail financial services industry, ensuring a level playing field.

Another principle which we can work on under the framework of the Consumer Duty is that agency must not be attributed to AI systems or algorithms, as this risks removing accountability away from firms.

And safe and responsible adoption of AI will always be underpinned by the quality of data.

We can rage against the machine but ultimately, we must agree that the responsibility for algorithms and AI stops with the human leaders at the top of firms.

So while AI needs governance for consumers to move from a place of fear to trust, many of the rules that cover financial services will already be in place, be that the Consumer Duty or the senior managers’ regime.

Financial inclusion

And that brings me to the question of financial inclusion.

I know some argue that the Consumer Duty may prompt risk aversion in firms and even withdrawal of products for difficult to reach groups. We will be monitoring closely to make sure this does not happen.

And as we work to enable you to take full advantage of digitalisation, this must come hand in hand with making sure that market developments don’t leave groups of consumers behind, particularly those most vulnerable or the least digitally enabled.

That is why the Consumer Duty has a particular focus on vulnerable consumers and taking reasonable steps to ensure informed decision making.

That is also why we have strengthened our guidance on cash provision asking banks to have alternative provisions in place if they wish to close branches or cash machines. This is in advance of any new powers that may be coming our way in the Financial Services and Markets Bill and accompanying Treasury policy statement.

But we also recognise that the world of banking looks different today than it did in previous years. We welcome the innovative ways some banks have worked to tackle access to cash difficulties, including with banking hubs.

We want to see banking hubs and alternative forms of provision accelerated and also for people and small businesses to be supported in moving to digital, where branches close in community.

And while the Consumer Duty will help firms and consumers in future navigate the cost of living crisis, we remain focused on what is happening on the ground today including how consumers are being treated.

We have seen lots of excellent and proactive work from industry and we thank you those involved for that. Where we have seen a minority of bad practice in dealing with vulnerable customers, we have demanded changes and used our powers to the full to affect them, an approach we will be continuing in the months ahead, as we know the coming period will be exceptionally challenging for millions of households throughout the country.

How industry handles this period will determine the industry’s reputation for decades ahead and I know that the leadership of the industry and UK Finance understand this more than most.

It is more critical than ever that borrowers and savers are offered fair and competitive rates.

We welcome lenders and deposit takers who are moving in this direction.

For others, the Consumer Duty is designed to raise the question as to whether savings accounts for loyal customers paying close to zero offer fair value.


We know we expect from industry, but we are leading by example in tackling some of the concerns that hold your businesses back: Strengthening our operational efficiency, reducing by half authorisations caseload with greater rigour and supporting innovations.

When the Government stated its intention to make the UK a global crypto hub, ministers were explicit the way to achieve this was to move fast while applying high standards of protection, citing our work around anti-money laundering (AML) registrations, sanctions and the push for greater powers over financial promotions. 

This plus our global leadership stance means we are in a position to act, not talk. We pioneered the Regulatory Sandbox with UK firms, now copied around the world. We are the first regulator to directly support early and high growth potential firms.

And earlier this year we held our first CryptoSprints – getting industry, legal experts and academics together to work at pace on how future regulation could and should work.

Through our chairmanship of the Global Financial Innovation Network (GFIN), we are about to launch a new sprint enabling firms to trial and scale new tech across multiple jurisdictions, focusing on environmental, social and governance (ESG), supporting global market access.

Similarly in Singapore last week, we chaired an IOSCO forum seeking to establish international standards for regulation of crypto and digital assets.

We also recently held an Authorised Push Payments Fraud Tech Sprint and have piloted use of synthetic datasets from both the communications and financial services sectors to identify fraud typologies to enable us all to tackle risks earlier and more proactively.

But there is a lot more to do. We must move at pace wherever we can. Within months of leaving the EU, we significantly reformed our listing regime and stand ready to do more once the requisite legislative decisions are agreed.

We are grateful for the industry’s participation in our sandboxes and our latest sprint on Open Finance.

UK Finance has been invaluable in helping communicate our events to members and we are grateful for its support. We want to work with industry to ensure that the UK remains the largest destination for fintech investment in Europe. And we want our firms to thrive in multiple markets.

Together, we will make sure the UK is the best place in the world to do financial services business.

Together, we will continue to build the UK as the gateway to global innovation.

It may be a jungle out there, but we want to work together with you to navigate it.