With the recent headline-grabbing noise coming from Westminster, few paid much attention to the key announcements coming out of the Financial Conduct Authority (FCA).
Senior figures from the regulator have been giving some of the most significant speeches about the future of financial services in years. But are the right audiences listening to this talk of change?
Last month, FCA chief executive Andrew Bailey talked to the great and the good at the Lord Mayor’s City Banquet, while Nausicaa Delfas – the regulator’s executive director of international – has been giving speeches about the necessary work to ensure that the UK remains a pre-eminent global financial centre when we look beyond Brexit.
But it was Christopher Woolard, the executive director of strategy and competition, who announced that the FCA is looking at a major review of all of the UK’s financial services regulations. This development should not be overlooked by those who care about the future of regulations in this country.
Now, a regulator talking about changes to regulation isn’t news in itself, but it was the bold, honest, and fresh thinking unveiled in Woolard’s speech which was the most significant development.
We are being told that the FCA isn’t just looking at the nuts and bolts of how it regulates the sector. This is a frank admission that the FCA needs to change its entire outlook to keep pace with the changing needs and demands of consumers.
These talks indicate that the FCA intends to move towards a system that focuses on outcomes – a potentially radical change.
This has come with the acknowledgement that, for too long, financial conduct regulation has been focused on narrow compliance.
Going forward, the FCA wants to tackle problems holistically, be clearer in its principles and expectations on businesses, and work with fellow regulators to focus on outcomes, not narrow individual mandates.
These changes will not be easy. For years, the FCA has relied on neo-classical economic theory to set its rules and regulations. But by the regulator’s own admission, it hasn’t looked enough at behavioural economics and how these rules affect the habits of businesses and people.
By shifting the focus to outcomes, the argument that regulation was followed to the letter will no longer hold weight.
More broadly, the FCA has made progress in modernising its approach in certain areas already – most notably on innovation. Without steps like these and a sense of willingness to support competition, the UK’s success in becoming one of the leading global markets for fintechs, challenger banks, and payment providers may not have happened.
Many successful new players weren’t here to have their say the last time our regulatory landscape was reviewed in 2013 – if they don’t take up this chance to help shape the regulatory landscape, they will be missing a massive opportunity for years to come.
We believe that this is a positive opportunity, and we should all welcome the clarity that the FCA’s approach could bring. For financial service companies of all sizes and stages, this is the chance to ensure that London maintains its position at the head of the global financial market.
The UK can’t sit back and rely on other markets to over-regulate and stifle their own developments. We need to present our visions, and use the new focus on customers and solutions as a great starting point.
The UK’s most successful financial services challengers haven’t waited for others to define them when it comes to their reputations and products. That approach shouldn’t change when it comes to regulation.
This could be one of the biggest chances in the last decade to reshape the sector – let’s not waste it.
Main image credit: Getty