Financial Conduct Authority  

Regulator urged to find moral compass

Regulator urged to find moral compass

The Financial Conduct Authority should change its approach to regulating the financial services sector after Brexit to encourage more socially conscious enterprises, according to a think tank.

A report published by the Finance Innovation Lab stated financial regulation has often been designed around the large, shareholder-focused firms that dominate the market and often disadvantages those attempting to use different business models.

The report cited the examples of Abundance Investment, a platform allowing people to invest as little as £5 in projects that benefit society and the environment, and Airdrie Savings Bank, which until early 2018 was Britain’s only independent savings bank.

Anna Laycock, the Lab's executive director and co-author of the report, said: "The combined forces of Brexit and digital disruption give us a once-in-a-generation opportunity to reorient regulation around the ultimate purpose of finance.

"Yet the experience of the innovators we work with is that regulation often fails to appreciate the huge benefits of models that put people and planet first. If we want to ensure our future financial system delivers for the economy and society, we need new regulatory mandates, rooted in democratic consultation; new metrics that focus on the things that really matter; and a different mindset, embracing fully human-centred regulation.

"There is no such thing as values-free regulation – only values-blind regulation. Now it is time to put human values back at the heart of the financial system."

The report, titled The Regulatory Compass: Towards a purpose-driven approach to financial regulation, recommended the FCA should do more to encourage greater diversity of business models in financial services.

The report stated it was a fallacy to claim encouraging more social purpose companies would amount to regulators taking an unjustifiable moral or political stance because regulation designed around dominant business models often disadvantages other business models.

The FCA did not respond to a request for a comment.

damian.fantato@ft.com