Regulation  

What are the FCA's goals for the coming year?

What are the FCA's goals for the coming year?

The Financial Conduct Authority publishes a business plan each year, but this year’s edition had been more widely anticipated than usual on the basis that it is the first under the stewardship of Nikhil Rathi, who was appointed FCA chief executive in October last year.

In addition, it is the business plan that sets the FCA’s course as the UK seeks to emerges from lockdown.

Given that last year’s plan was fairly short and the publication of this year’s edition had been pushed back, many in the financial services industry were expecting a fairly substantial document.

However, those wanting this may have been somewhat disappointed. Many of the messages in the plan appear to be continuing themes from previous years and for some the messaging may not have been specific enough in order to draw up concrete next steps, with the FCA saying in a number of places that it will either “continue to assess” or “investigate” something. 

However, one important point to note is that the business plan says that from April next year the FCA will start reporting on progress publicly, which may act as a further catalyst.

Progression points

Accompanying the launch of the business plan was a webinar given by Rathi, who asserted those familiar words that the FCA must continue “to become a forward-looking, proactive regulator” and that it must be one that “is tough, assertive, confident, decisive, agile”.

In order for the FCA to get there, Rathi said that there needed to be progress on three fronts:

  1. Continuing to be more innovative: taking advantage of data and technology to increase the regulator’s ability to act decisively.
  2. Continuing to be more assertive: testing the limits of its powers and supporting others to bring their powers to bear.
  3. Continuing to be more adaptive: constantly learning and always adjusting the approach as consumer choices, markets, services and products evolve.

In terms of data, Rathi made the point that it is “the lifeblood of a modern regulator” and that over the next five years the FCA “will become a data regulator as much as a financial one”. 

The FCA has in fact had a data strategy since 2013 (updated in 2020), when it spoke about wanting to be smarter in the way it used data and advanced analytics to transform how it regulates businesses and, importantly, reduce the burden on them.

However, the business plan does not provide much insight into what the FCA is going to do next on this front, other than mention that data and regulatory returns will be streamlined through digital regulatory reporting and that there will be better co-ordination between the UK regulators, which will streamline the operational impact on companies.

As for continuing to be more assertive, there is some interesting commentary in the business plan regarding proposals to streamline decisions about authorisation and specific supervisory and enforcement actions.

For example, the plan talks about a consultation that will be published shortly which will include proposals that will change the balance of decisions taken by the FCA Executive Committee and the Regulatory Decisions Committee.

The business plan adds that the FCA expects to “intervene in real-time more often to prevent harm to consumers and market integrity, including, if necessary, turning down more applications for authorisation”. This is an interesting point in the sense that the FCA seems to be saying the trend of using its supervisory powers at an earlier stage may continue signalling a 'prevention is better than cure' approach.