The Financial Conduct Authority has rebuffed a request by the Treasury Committee that it focuses more on financial inclusion, saying this would risk the regulator stepping in to fix problems it does not have the power to solve.
The chief executive of the FCA, Nikhil Rathi, said having further regard for inclusion would not add to the existing ability of the regulator to act within its remit in line with its objectives.
“[This] might risk increasing expectations that the FCA should step in to fix problems that it does not have the power to solve,” he said.
This could even lead to further confusion, rather than addressing the root causes of financial exclusion.
Rathi was responding to the Treasury Committee’s recommendation in its ‘Future of Financial Services Regulation’ report that the Treasury requires the FCA to have regard for financial inclusion in its rule-making.
“The FCA should make every effort to ensure that it is not designing or implementing regulation in a way which could unreasonably limit the provision of financial services to consumers who might benefit from them,” the report said.
The FCA also disagreed with the Treasury Committee's request that it should provide an annual report to parliament on the state of financial inclusion in the UK.
The regulator said doing so would not be appropriate or feasible for it to advise parliament or other bodies on this issue.
Rathi acknowledged that financial inclusion appears to fall between various authorities, but added that this is because the causes of exclusion are complex and multifaceted and do not sit “neatly” in one sector.
Growth objective
The FCA agreed with the Treasury Committee’s request that the Treasury reject any calls for the regulator’s primary objective to be of growth and competitiveness.
“This would increase any pressure on regulators to trade off competitiveness against resilience,” the report said, adding that this would undermine the regulators’ ability to deliver on their core functions.
“There is a danger that as memories of the financial crisis fade, its lessons are forgotten,” it said.
Rathi agreed, saying the proposal for a secondary objective strikes an appropriate balance, “enabling us to continue and further facilitate long-term growth without detracting from our existing primary objectives”.
Chair of the Treasury Committee, Mel Stride, said following the UK’s withdrawal from the EU, regulators have taken on new and greater powers.
“Underpinning our financial services industry is the principle of regulatory independence, as well as the operational independence of the Bank of England,” he said.
“The Committee will remain alert to ensure that regulators are not leant on to inappropriately water down regulations to the detriment of the safety and soundness of our financial services system.”
sally.hickey@ft.com
