FCA to hold itself to account as part of three year strategy

For the first time, the FCA has committed to holding itself accountable against published outcomes and performance metrics. The regulator’s 2022/23 Business Plan, released this week, also committed to bolstering its staff to better deal with ‘problem’ firms. Although much of the three-year strategy looks at operational effectiveness – a target for recent criticism – the FCA continues its focus on consumer outcomes and is flexing its muscles with a commitment to taking swifter action.

Introducing the 3-year strategy for 2022-25, Nikhil Rathi highlights the importance of operational excellence in addressing a constantly changing world. He also makes his tougher stance and data-driven approach clear:

“We are being tougher on firms who want authorisation to operate in the UK, using data more systematically to ask the firms we supervise more rigorous questions and using our enforcement and intervention powers more actively, pushing the boundaries where we need to.”

What’s in the FCA’s three-year strategy?

The FCA’s three-year strategy, and the Business Plan for the coming year, are focused around three key areas, and 13 commitments they are striving to achieve:

  1. Reducing and preventing serious harm
  2. Setting and testing higher standards
  3. Promoting competition and positive change

Reducing and preventing serious harm

This will see the FCA using data to assess problems faster, aiming to prevent harm from happening in the first place. Having identified the biggest cause of consumer harm is through online channels, they have committed to working with Government to combat this through proposed new legislation.

Six commitments have been made to reduce and prevent conduct that can cause serious harm:

  • Dealing with problem firms
  • Improving the redress framework
  • Reducing harm from firm failure
  • Improving oversight of Appointed Representatives
  • Reducing and preventing financial crime
  • Delivering assertive action on market abuse

Additionally, they have recruited 95 new staff to ensure their processes for authorising firms are more robust and efficient in supporting this aim.

Setting and testing higher standards

This is a fundamental part of delivering an outcomes-based approach. The FCA states that too many well-established firms are still not selling suitable products that provide good standards of customer service. The documents reference the new Consumer Duty which the FCA intends will ensure every firm considers the actual impact of products and services on consumers. At the same time, it is intended to give firms greater certainty about how they should treat consumers and greater flexibility on how they deliver good outcomes.

Four commitments have be made to set and test higher standards, so firms deliver the outcomes they expect. These include:

  • Putting consumers’ needs first
  • Enabling consumers to help themselves
  • Environmental, social and governance (ESG) priorities
  • Minimising the impact of operational disruptions

Promoting competition and positive change

This final area is promoting competition and positive change with greater regulatory open-mindedness. The FCA references the recent listing reforms and are building on their ‘sandbox’, by introducing a ‘scalebox’. They also reference the transition to a greener and sustainable economy and the UK’s departure from the EU, with opportunities to adapt the regulatory system and strengthen the attractiveness of UK capital markets.

Three commitment have been made to promote competition and positive change. These are:

  • Preparing financial services for the future
  • Strengthening the UK’s position in wholesale markets
  • Shaping digital markets to achieve good outcomes

How will the FCA deliver on their outcomes?

The FCA are “joining up their tools to act efficiently, effectively and consistently”. The regulator vows to measure industry performance, learning and acting with greater agility. They have outlined six core regulatory activities within their business plan that will help them achieve their outcomes:

  • Authorise firms and individuals
  • Set rules and standards
  • Support competition and innovation
  • Empower consumers and firms
  • Recognise and reduce harm
  • Take quick and effective action

It’s clear the regulator is intending to be ‘smarter’ with how it leverages its tools to regulate firms and reduce consumer harm.

FCA Business Plan 2022/23

The FCA Business Plan sets out in more detail the actions they plan to take to meet all of the commitments above. Detail of FCA’s planned work programme can be found in the FCA’s Regulatory Initiatives Grid. This provides details for each sector of the FCA planned activities and helps firms understand and plan for the timing of the initiatives that may have a significant operational impact on them.

We can help

Our team comprises of specialist consultants, ex-regulators, lawyers and former Compliance Officers. We can help you understand and deliver what the FCA expects, whether you’re looking to be authorised for the first time, are concerned about regulatory scrutiny or want to stay ahead of regulatory change.

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