News & Views

The FCA's five year strategy - Balancing growth and consumer protection

The Financial Conduct Authority (FCA) has outlined its strategic priorities for the next five years, focusing on deepening trust, rebalancing risk, supporting growth, and improving lives. This strategy involves a commitment to being a smarter regulator, supporting growth, helping consumers navigate their financial lives, and fighting financial crime. Below, we’ve summarised some of the key takeaways.

• Opportunities and challenges - The strategy acknowledges several opportunities and challenges, including technological change, the need for growth, global uncertainty, challenging financial resilience, and demographic change.
• Becoming a smarter regulator - To become a smarter regulator, the FCA plans to reform its regulatory approach, streamline processes, and use technology to improve efficiency and effectiveness. This includes being more flexible in supervision, providing better access for firms, and streamlining how supervisory priorities are set. The FCA also aims to be more proportionate and easier to engage with, including improving data collection and launching a single-entry point for firms to manage their regulatory obligations.
• Rebalancing risk - The FCA intends to rebalance risk by enabling informed risk-taking rather than eliminating risk entirely. This involves considering regulatory risk, market and firm risk, and consumer risk, and finding a balance that encourages innovation and competition while protecting consumers.
• Supporting growth - Supporting growth is a key priority, with the FCA aiming to ensure that financial services contribute to the wider economy. This includes changes to disclosure requirements, widening access to investment opportunities, supporting productivity improvements, and fostering innovation in the payments sector.
• Helping consumers - The FCA also focuses on helping consumers navigate their financial lives by ensuring trust in financial products, driving better value for money, and working with the industry to provide support and information for financial decisions. The Consumer Duty is central to this effort, aiming to increase people's confidence in financial products and services.
• Smart data revolution - The FCA aims to lead a smart data revolution by prioritizing the development of seamless account-to-account payments, making Variable Recurring Payments a reality, and embracing opportunities for greater data sharing through Open Banking and Open Finance.
• Fighting financial crime - Fighting financial crime remains a priority, with the FCA focusing on disrupting crime, collaborating with partners, and supporting firms in preventing the misuse of financial services. The FCA will also work to enhance consumer protection against fraud and scams.
• International focus - There is a commitment to being an international regulator for an international market, working with industry and the government to maintain and improve the UK's position as a leading financial hub. This involves engaging with international standards and fostering strong relationships with international counterparts.

Our conclusion

The FCA's 5-year strategy presents a compelling vision for the future of financial regulation in the UK. The plans outlined to foster innovation, support growth, and enhance consumer protection are laudable and, if achieved, should further bolster the UK's reputation for having a robust yet forward-thinking regulatory regime; however, the FCA faces some significant challenges that may impact the achievability of these goals.

There are concerns about the FCA's resources, both financial and non-financial, and its expanding regulatory remit, which includes areas like crypto-assets, AI and FinTech, and potentially litigation funding. Successfully navigating these challenges will be crucial for the FCA to turn its ambitious strategy into reality and ensure the continued strength and stability of the UK's financial sector.

For further information, please email Joshua Bates or call 0151 906 1000.