Your Industry  

News from 2020: The closure of the FCA

News from 2020: The closure of the FCA

“Who controls the past controls the future. Who controls the present controls the past.” George Orwell, in 1984

The UK government announced today that the Financial Conduct Authority (FCA) is to close. The culmination of financial regulation globally began in 2018 with the widespread introduction of distributed digital ledger technology (DDL).

The groundbreaking technology made trusted intermediaries – who had dominated deposit taking and the provision of loans since the 18th century –redundant with billions of global assets moved onto DDLs. The growth in algorithm-based, data-driven structures with minimal infrastructure costs enables consumers and businesses to deal directly with governments, peer-to-peer lenders (P2P), fund and pension managers, and investment houses.

Article continues after advert

The Financial Policy Committee and the Prudential Regulatory Authority will remain to monitor the micro- and macro- environments to ensure stability in global and European interest rates. A source close the PRA stated “with the huge Fintech implementation over the past 5 years, there is simply nothing left to regulate”.

In terms of small advice and wealth management firms, since the introduction of safe-harbour financial advice delivered by Pension Wise and the Citizens Advice Bureau in 2017, the majority of financial advisers closed with just over 400 small firms and 600 regulated advisers remaining who provide financial planning services to wealthy, elderly clients, arguably the last of the internet-illiterate segments. The government announced as part of the FCA closure that small firms will transition to self-regulation over the next two years.

The wrap platform market that dominated consumer investing was hit hard with the implementation of DDL resulting in billions of assets being removed in favour of zero-cost cloud based systems. The revolution was even more devastating in lending – the loan and mortgage markets are currently fully automated and delivered through low cost P2P structures.

One former building society CEO, whose business closed in 2019,said “Peer-to-peer lenders simply took all our traditional business, with distributed digital ledgers you don’t have legacy issues, hardware infrastructure with IT systems that continually need updating and cost billions”.

P2P lending, arguably slow to take off, exploded in 2018 with the full introduction of DDL technology allowing global deposits and lending deals at small costs, which can be accessed 24 hours a day without human interaction. Developing nations have been quick to exploit these cheap loans to build their infrastructure. The World Bank has set up its own P2P disrupted ledger which currently handles over £300 billion in loans without the requirement of any trusted intermediaries.

In 2018, P2P moved to a data-driven process, scrapping the traditional credit-score system. The removal of loan officers and underwriters from the lending process was arguably responsible for the boom in small business lending and growth in 2019,resulting in an increase of 1.5 per cent in the UK’s GDP figures. Crowd-based funders dominate the market for new start business start-ups. The move away from credit scores, a system which excluded millions of global consumers from borrowing and opening bank accounts has resulted in cheaper costs, increased equality and reduced exclusion.