Following on from HM Treasury's Policy Paper on how UK regulators and regulation can support growth, the FCA has published its five-year strategy paper (the Strategy Paper), which focuses on the four key priorities of making the FCA smarter regulator, supporting economic growth, protecting customers, and fighting financial crime. The FCA also published a feedback statement (FS25/2) on the outcome of its consumer duty review of the retail conduct rules and how it can simplify its rules going forward.
FCA Strategy Paper
The Strategy Paper did not provide the detail that many had expected, instead it focussed on the principles that should guide the FCA's approach to supervising firms and developing simplified and streamlined rules, which will hopefully strike a better balance between the desire to support growth and protect consumers.
The FCA identifies the following key priorities:
- Be a smarter regulator by supervising firms in a manner that is more predictable, purposeful, and proportionate. The FCA intends to improve its processes and embrace technology to become more efficient and effective. This will include seeking to digitise the authorisation application process, publishing supervisory insights to help firms understand good and bad practice, and providing regulated firms with direct contact points at the FCA. The FCA notes that it expects to take on a smaller portfolio of enforcement cases, which should result in faster outcomes for impacted clients and investors and will reduce the depth of supervision for lower-risk firms and those who demonstrate that they want to “do the right thing. Firms will welcome the FCA's intention to dedicate more resources to provide more firms with a direct supervisory contact and apply a proportionate approach to supervision.
- Support sustained economic growth by making better use of technology including advanced analytics and relying on existing regulation to regulate innovative businesses. The FCA states that its role in supporting growth is not simply to get out of the way but to think about rebalancing regulatory risks and refers to its proposed capital markets reform agenda and the digital securities sandbox as examples of how the FCA can support investment in companies who operate in the UK market.
- Help consumers make informed decisions by working with industry to boost trust, promote product innovation and, with an emphasis on financial inclusion, broaden access to products (including mortgages, financial advice, and pensions), whilst ensuring the right information and support is available to clients. This is likely to result in the FCA revisiting rules on affordability assessments, and adviser fees.
- Following announcements about the re-structuring of payments regulation, a renewed focus on payments innovation and competition, aligned to the National Payments Vision. The evolution and expansion of Open Banking and a roadmap to open finance have been announced. The immediate focus for the latter is expected to be SME finance, with a roadmap expected within a year and the first regulatory foundations by the end of 2027.
- Fight financial crime, focusing its efforts on preventing market abuse and fraud. In this regard, the FCA intends to make better use of technology and to raise awareness of investment and authorised push payment frauds.
The FCA notes that global cooperation may be more challenging in the current political environment, and that it will consider working with “a smaller group of like-minded jurisdictions” to pursue its aims and objectives. The FCA also notes that to the extent that global standards are not implemented across key jurisdictions, strong bilateral relationships with local regulators will be required to facilitate effective supervision and oversight. With this in mind, the FCA intends to...