On 16 January 2025, Nikhil Rathi, Chief Executive of the FCA, wrote to the Prime Minister, the Chancellor and the Secretary of State in response to the Government's call to ensure regulators and regulations support growth.
In opening, Rathi said:-
"We want to collaborate with you in a fundamentally different way to support the growth mission. To achieve the deep reforms necessary, your acceptance that we will take greater risks and rigorously prioritise resources is crucial."
Here are just a few of the things he mentions in this context:-
- reforming listings rules;
- bolstering investment research;
- revolutionising the provision of financial advice;
- reforms to fixed income and commodity markets to sustain UK market leadership; and
- removal of the bonus cap (in conjunction with the PRA).
However, and somewhat oddly, Mr. Rathi refers to record levels of financial crime prosecutions contributing towards the growth agenda, apparently on the basis that crime impedes growth and drives compensation levies.
Unlocking capital investment and liquidity
New ideas which the FCA proposes to test with the Government and through wider consultation include:-
- implementing a new prospectus regime with shifts in thresholds and liability;
- easing retail access to corporate bonds;
- enabling a new market for private companies;
- streamlining regulatory requirements on the asset management sector;
- accelerating a review of capital requirements for specialised trading firms to improve liquidity; and
- accelerating digital innovation to enhance productivity.
Reducing the regulatory burden
- The FCA say they are already working to remove unnecessary regulation and reduce how much data some firms must provide. They plan in 2025 to:-
- streamline our handbook following industry input on rules which could be removed or simplified; and improve accessibility and efficiency with a machine-readable version;
- with the Bank of England/PRA, continue reducing reporting burdens for firms; and
- make the Senior Managers and Certification Regime more flexible.
They will now go further:-
- removing the need for a Consumer Duty Board Champion now the Duty is in effect; and
- ensuring future consultations on consumer protection ask if the Consumer Duty is sufficient rather than new rules.
Further still, and with Government support, the say they could reduce costs of anti-money laundering measures by relaxing know your customer requirements on small transactions.
The Treasury also commenced modernisation of the Consumer Credit Act in 2022. If accelerated, the FCA say they could reduce burdens further and faster.
Making it easier for firms to start up and grow
In relation to the process and speed to authorise a firm, the FCA already intend to do more to digitise our authorisations process to reduce timescales and cost. They will go further and:-
- provide a dedicated case officer to every firm in our regulatory sandbox;
- support more early and high growth firms, with 50% more dedicated supervisors;
- extend pre-application support to all wholesale, payments and crypto firms;
- indicate more frequently that we are "minded to approve" promising start-ups to help them secure funding; and
- in relation to how some innovative start-ups find it hard to meet all the threshold conditions immediately, the FCA want to work with the Treasury to create a legislative framework that enables relevant firms to conduct limited regulated activities with streamlined conditions.
Certainty and predictability
Mr. Rathi writes that certainty and predictability underpin business and investor confidence. Subject to the Supreme Court and other legal timetables, the FCA will provide clarity on potential motor finance redress this year.
Furthermore, through proactive management of issues and improved coordination with the Financial Ombudsman Service, the FCA say they will aim to prevent further significant FCA-led consumer redress exercises. As part of that, we are considering reforms to the redress framework which may need legislation.
The letter concludes by saying that:
"Enabling more informed risk-taking requires enduring acceptance, as the Chancellor has recognised, that we need to prioritise resources and that there will be failures. This acceptance needs to be shared across all our accountability mechanisms, including in Parliament. We will not stop all harm when making risk-based choices about the cases and intelligence we pursue,…"
Our observations
The FCA emphasise that pursuing a growth agenda would involve acceptance that the FCA will take "greater risks" and that "there will be failures".
In terms of the individual initiatives, a number appear to have already been in the FCA's pipeline rather than being new and novel.
Our own view is that while some of the steps outlined may promote growth, the proposals do not involve a radical departure from their current modus operandi, and we cannot see them as "game-changing".
Author: David Capps
