The survey on perceptions of the regulator, conducted among close to 1,500 regulated firms, reveals that larger firms which are relationship managed have a “far better” understanding of the FCA, its objectives and plans than those that are not.
Wholesale firms are also generally more satisfied with the level and effectiveness of regulation than retail firms.
The panel states that while it is “understandable” that the regulatory focus for communications about the FCA was initially on larger firms, the survey shows there is mounting frustration amongst smaller firms about the impact of regulation.
This, it adds, was especially the case among smaller firms affected by the Retail Distribution Review.
As the FCA has decided to reduce the number of firms who are relationship managed in the new system, the FCA will need to “think hard” about alternative methods of getting its message across to the majority of regulated firms who are not relationship managed.
The panel says: “The FCA must put more effort into communicating with smaller firms and offering them some means of engagement and building up their understanding of the regulator.”
The survey also reveals concern that the FCA’s more interventionist approach could lead it to ‘overreact’ to potential problems in the market and so undermine both industry and consumer confidence.
Larger firms are worried about being placed at disadvantage compared with competitors abroad - and both smaller and larger firms are withdrawing from markets and services due to regulation.
The panel adds that firms are broadly far more confident in the FCA’s ability to meet its consumer protection objective than its competition objective.
It states: “It is critical that the FCA works to put in place a clear action plan on how it will tackle its competition objective and promote that in the wider community and within the regulator itself.”
When asked for a single message for the FCA board, the industry’s views can be grouped into three key areas: proportionate treatment; proactive approach; and predictable regulation.
The panel says the FCA needs to provide “clear and consistent messages” to firms in how they want them to behave. It adds that it must ensure it does not adopt a “one size fits all” approach.
