The National Audit Office (NAO) has launched a probe into the functions of the the Financial Conduct Authority, as the regulator’s remit swells to take on oversight of technologies like cryptoassets and artificial intelligence.
In an update on its active work, the NAO said the FCA’s perimeter was facing a major change as ministers push ahead with a post Brexit refresh of financial regulation.
The NAO is now set to kick off a deep dive into its operations later this year.
“Recently, significant changes have been introduced or proposed to the FCA’s regulation of the sector,” the NAO said.
“These include the Future Regulatory Framework, a new Consumer Duty for regulated firms, and a new proposed statutory secondary objective for the FCA to facilitate the international competitiveness and growth of the UK economy in the medium to long term.”
New technologies like cryptoassets and artificial intelligence also “provide challenges and opportunities” for regulators, the NAO added.
FCA chief Nikhil Rathi last week warned that AI was allowing criminals to use new cyber fraud, cyber attacks and identity fraud scams which were “increasing in scale and sophistication and effectiveness”.
Crypto firms are also set to be brought within the remit of the City watchdogs later this year.
The probe comes amid a major shakeup for financial rulemaking as ministers grant new powers to regulators following the ascent of the Financial Services and Markets Bill.
As part of the NAO’s probe, investigators will also scope out the workings of the FCA with other public bodies including the Treasury, after a series of tense run-ins in the 12 months.
The FCA and the Treasury were at loggerheads last year as Rishi Sunak tried to force through so-called call-in powers, which would have given the Treasury powers to overrule the regulator. The plans were canned after pushback from the City regulators.
Ministers have also convinced regulators to include a secondary objective of growth and competitiveness in a bid to try and boost the international standing of the UK’s floundering financial services sector.
The NAO last audited the FCA a year after it was formed in 2014.
An FCA spokesperson said in a statement it welcomes the NAO’s review of the FCA “as it could help us to ensure we continue to meet our objectives”.
“We have a clear strategy in place about what we want the FCA to be, and we are well underway to achieving that,” the spokesperson added.