FCA five-year strategy underscores commitment to building trust in financial industry

Elizabeth Budd and Jonathan Cavill, financial services experts at Pinsent Masons, were commenting on the strategy (22 pages/2 MB), which aims to address emerging challenges in the financial sector, enhance consumer protection, and promote market integrity. 

Budd said: “The statement demonstrates that the FCA is keen to maintain and enhance the role of the UK as a world-leading, trustworthy financial services hub. This strategy clearly identifies the macro challenges faced by the FCA. It acknowledges the serious issues of global instability, demographic shifts, significant technological changes and growth that has remained low for several years.”

The FCA strategy is built on four priorities which support its statutory objectives relating to consumer protection, integrity, competition and growth. These are being a smarter regulator; supporting growth; helping consumers; and fighting crime. 

The FCA plans to leverage advanced analytics to identify and mitigate risks more effectively. By enhancing its regulatory framework, the FCA aims to prevent harm before it occurs, working to ensure a safer financial environment for consumers. The FCA has set out its commitment to raising the bar for financial services firms. This involves rigorous testing of firms’ compliance with regulatory standards and promoting best practices across the industry with an aim to foster a culture of excellence and accountability. The FCA strategy further recognises the importance of a competitive market in driving innovation and improving consumer outcomes. The strategy includes measures to encourage competition, support new entrants, and facilitate positive changes in the financial landscape. 

The strategy highlights several focus areas the FCA considers critical to achieving its statutory objectives. For instance, consumer protection, with the FCA planning to implement new measures in order to safeguard consumers from financial misconduct and ensure they receive fair treatment. This includes stricter oversight of firms and enhanced transparency in financial products and services. The regulator has also set out plans for technological innovation, considering the embrace of technological advancements as a key component of the strategy. The FCA plans to invest in cutting-edge technology to improve its regulatory capabilities and support innovation across the financial sector. Additionally, the FCA has highlighted its commitment to sustainability in the strategy, setting out its commitment to promoting sustainable finance practices, such as encouraging firms to adopt environmentally responsible policies and supporting initiatives that contribute to a greener economy. 

Cavill said: "By emphasising the prevention of serious harm, raising standards, and fostering competition, the FCA aims to create a more secure and transparent environment for consumers. The proactive measures and innovative frameworks outlined in the plan underscore the FCA's commitment to improving lives and building trust in the financial industry. This strategic approach not only looks to support economic growth but also ensures that consumers are shielded from potential risks. This is likely to be a challenging balance for the FCA to walk, particularly where in the past the regulator has been criticised for not doing enough for consumers quickly enough."

The FCA will adopt a data-driven approach to decision making in order to successfully implement the five year strategy. This includes setting clear performance metrics and regularly assessing progress as well as working to enhance its collaboration with international regulators to address global financial challenges. 

Published at the same time as the strategy, the FCA has issued a feedback statement (15 pages/393 KB) setting out “immediate areas for action and further plans for reviewing FCA requirements following introduction of the Consumer Duty”. The FCA will be progressing its intention to use the consumer duty to enable it to remove detailed rules and regulations. 

Budd said: “While this may appear to be a positive move, no one wants unnecessary regulation, the consumer duty, which operates on an outcomes-based approach, contains numerous areas of grey where better guidance would be welcome.”

The FCA will be using an accelerated consultation process to consult on changes to mortgage regulation and discussion questions on the international scope of conduct rules in the insurance market and more widely. It will also be reviewing the financial promotion rules for consumer credit, to run alongside HM Treasury plans for reform of consumer credit more broadly.

Budd said: "The FCA has previously warned that it intends to move at pace. To achieve this the regulator plans to hold an in-person summit this summer to discuss these issues, with representation from other UK authorities, firms, trade bodies and consumer organisations. Firms who perhaps have not been active with relevant trade bodies may want to revitalise their memberships."