The chairman of the Financial Conduct Authority (FCA) has said the approach of regulators and legislators will need to change post-Covid.
In a speech yesterday (April 24) at the Finance and Leasing Association industry gathering, Charles Randell highlighted five things the regulator needs to do differently “in order to transform the FCA to be as effective as it can be in this new world”.
He said one of the regulator’s priorities was to ensure regulated firms were “good enough”.
Randell outlined how the number of firms the FCA regulates has more than doubled over the past ten years and continues to grow and that some firms have exploited their regulated status.
He said: “The review into London Capital & Finance highlighted the risks from firms which exploit the 'halo effect' of FCA authorisation.
“This means that we not only need to be rigorous with firms at the point when they apply; if we do authorise them, we need to know whether they are using their authorisation and what for; and we need to quickly remove the authorisations of firms which are not using them or which are misusing them.
Earlier this week FCA chief executive Nikhil Rathi said the regulator was reviewing its Regulatory Decisions Committee, the final decision maker on contested enforcement, supervisory and authorisation interventions, with a view to enabling it to act quicker when concerns about firms have arisen.
Randell said: "Being tougher and more effective in these gateway activities will reduce what has been called the '60,000 firm problem'.
"We know what we have to do - and we are already acting, so that a firm with FCA authorisation will have to 'use it or lose it."
Randell said the second focus will be on getting the basics right, outlining the FCA’s four priorities for basic consumer protection: safe and accessible payments, sustainable credit, clear and safe investment choices and fair product terms, including price.
“We will continue to focus on them because, frankly, none of these aspects of consumer financial services is yet in a satisfactory place,” he said.
The "third big change" will be for both the FCA and firms to focus on customer outcomes.
"In order to play our part in producing these outcomes, we need to collect and use the right data from firms, joining those data up with a cross-organisational strategy to intervene more promptly.
"It’s easy to talk about outcomes-based regulation but experience shows it’s hard to deliver," he said.
Randell added he would say more on this topic next month.
The final two focus areas comprised a reshaping of regulation and of “ourselves”.
Randell highlighted the speed of change in the industry, particularly with the rise of digital services. He spoke of the difficulty of using detailed laws and rulebooks, which take a long time to change, to tackle a world of digital activities which are changing faster and faster.