Red tape needs to be cleaned up rather than cut to boost the financial sector, a report out today argues.
In particular, the Confederation of British Industry (CBI) found that uncertainty surrounding the direction regulation was heading could be making firms nervous about allocating resources to projects, as they desperately try to second guess what rules will come next.
The CBI is now calling for more formal collaboration between the financial sector's key watchdogs, the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA).
The CBI is also urging the regulators to introduce open days and secondments, to give regulators more opportunity to interact with the firms they oversee, and for evidence to be taken across the sector on the impact of regulation so far.
If such shifts were to take place, the report pointed out firms would be more able to focus on building their businesses and serving their customers.
"In order for the [financial services] sector to support business and to benefit everyone effectively, regulation must be fit for purpose," said Simon Moore, CBI financial services director. "A cultural change is needed to ensure a more practical approach to regulatory shift, through collaboration and engagement, creating a level playing field between smaller firms – who are disproportionately hit by the regulatory burden – and larger companies competing in the sector.
"Smarter regulation – not less regulation – will provide certainty to financial services firms, allowing them to adapt in a shifting political and economic climate as well as anchoring our competitiveness as a global financial centre."
An FCA spokesperson said:
We have recently published our mission which is designed to provide a guiding set of principles around the strategic choices the FCA makes. As part of the mission we will be seeking engagement with all our stakeholders so that we can set out a clear path ahead for financial conduct regulation in the UK. We would welcome the CBI contributing to that.
The PRA has not responded to City A.M.'s request for comment at time of writing.
Last month, a report by Cass Business School for New City Agenda slammed the sector watchdogs for being more focused on box ticking than bringing in meaningful regulation, and hiding behind reams of red tape.
Andrew Bailey, chief executive of the FCA, later hit back at that report, calling it "pretty disappointing" in the way it looked at the watchdog's past rather than its future, and in at least one place was "just downright offensive".