The transformation at the FCA under Nikhil Rathi, Chief Executive, is now in its second year. In his vision for the FCA, he said we would begin to see a different type of FCA. More innovative, more assertive, more adaptive. A regulator which is tougher on firms who want authorisation to operate in the UK, using data more systematically and a raising of the bar in both supervision and enforcement.
In their recent strategy document, they have outlined a revised operating model to focus more on the problem and on results rather than being driven by processes, a more holistic and outcomes-focused approach than has been seen previously with a focus on:
Reducing and preventing serious harm
Setting and testing higher standards
In our forthcoming webinar, in partnership with Worksmart (sign up for free here), we will be discussing the latest FCA corporate documents, their Strategy 2022 to 2025 and Business Plan 2022/23. Ahead of that, however, I thought I’d share some of the key messages and my thoughts and reflections on these key publications.
Firms need to understand their consumers’ needs and have the flexibility to support consumers, so they get good outcomes. This is likely to be particularly important as consumers face increasing financial pressures.
We have an outcomes-based regulator that places the responsibility of good conduct and the prevention of harm on firms’ senior management. Whilst an outcomes-based approach allows firms more flexibility, it also creates challenges, with many firms often looking for greater comfort and the safe harbour that comes from prescriptive rules. As well as acting to deliver good customer outcomes, firms will need to understand and evidence whether those outcomes are being met.
The FCA are particularly concerned about protection for those that need it most – the most vulnerable in our society, where firms operate at an advantage (knowledge and understanding). A clear focus for the FCA is protecting consumers from losing life-changing amounts of money due to fraud or from firms with poor conduct.
The focus and importance the FCA places on the new Consumer Duty is obvious and forms a significant part of the FCA's future regulatory and supervisory approach. It plays a critical role in the step change the FCA is expecting.
Thoughts from others
There is an old saying ─ ‘Where you stand depends on where you sit’. It’s called ‘Miles Law’ and is attributed to Rufus Miles of Princeton University back in the 70’s. The point is that one’s perspective is always shaped by their environment. That’s why diversity is so critical in organisations today. So, what are the key messages in the eyes of stakeholders across the industry?
“A clear and recurring theme throughout the Strategy and Business Plan is the Consumer Duty. The FCA has made it clear that they are embedding it in their approach, working practices and mindset. As a firm, we will need to ensure that we do the same. Within the Consumer credit sector an important element of this will be putting ourselves in our customer's shoes and always asking the question - do our products meet their needs at a fair cost?” – Chief Risk Officer, FCA Regulated Firm.
“It is refreshing to see the FCA state that they are continuing to commit to being held accountable and promising to publish measures and report against its progress over time. As an industry player- this is a positive - given the accountability for those under the Senior Manager regime.” – Head of Financial Crime, FCA Regulated Firm.
"There is constant reference to firms being more proactive where instances of harm are identified. I expect greater focus from the FCA on critical conduct KPIs such as complaints, where it is more efficient and effective for the firm to resolve these without them needing to be referred to the Financial Ombudsman Service” – Chief Operating Officer, FCA Regulated Firm.
“I applaud the FCA for their recent documents. A three-year strategy makes sense as nothing is solved in one year. The combination of the strategy and one year plan works well. It is clear to anyone in the industry that the FCA intends to be more assertive, using data and knowledge to focus attention and find outliers in the historical flex firms that comprise most of the financial services industry. It is a shot across the bow that financial services firms MUST step up and demonstrate that they are putting customers at the forefront of their business, even in the face of competition” – Non-Executive Director, FCA Regulated Firm.
“One eye-watering figure which stood out to me was the significant increase in the FSCS levy, which has increased over the last decade (from £277m in 2011/12 to an expected £717m for 2021/22). Have firms failed? Has regulation of firms failed? Or both?” – Head of Compliance, FCA Regulated Firm.
“Consumer protection continues to be high on their agenda, applying a Financial Crime lens, given fraud remains high in the market, education campaigns and continued investment in controls to detect and prevent fraud will need to be a priority for firms” – Head of Financial Crime, FCA Regulated Firm.
“The FCA reference to their investment in their Data strategy and using these tools to be more intrusive and to ask firms more rigorous questions. Firms, therefore, need to be on the front foot and continue to invest in their capabilities to analyse data and intelligence available both publicly and internally. Stating the obvious any data being provided to the FCA should be analysed and any potential risk outcomes considered and acted upon in a timely manner. An obvious example in the FC space is the annual REPCRIM submissions to the FCA” – MLRO, FCA Regulated Firm.
Learn more today
To learn more about the latest key publications from the FCA and its potential impacts on the financial services sector, login to our free webinar on the 31 May (11.00-12.00 am), where in partnership with Worksmart, we will:
Provide an overview of the latest FCA Business Plan for 22/23 with our thoughts, reflections and observations
Outline the six core regulatory activities and the thinking behind the framing of the approach
Debate the three key areas of regulatory approach for the year and the outcomes that they seek
Discuss the key regulatory activities that are planned in support of the areas of most concern
Examine how RegTech can support the achievement of regulatory priorities
Sign up for free, here today.
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