FCA poised to take more ‘proactive’ approach despite capacity strains
The UK’s top financial watchdog said it was preparing to take a more “proactive” approach to identifying new financial threats today as it races to recruit staff this year to meet its growing remit.
In its annual report, the Financial Conduct Authority (FCA) outlined its regulatory perimeter and said it would be looking to enhance the way it patrols for emerging risks in the financial system, including “beyond [its] jurisdiction where necessary”.
“We are being more proactive and enhancing our horizon scanning capabilities so we can better spot and respond to emerging risks,” the FCA said in its report.
“This includes scenario analysis that will enable us to consider where risks may be most likely to grow both inside and outside the perimeter.”
Boss Nikhil Rathi said that as the watchdog’s workload swelled it was also looking to transform into a more “forward-looking, data-led” organisation.
The remit of the FCA has expanded in recent years as it takes on oversight of new areas including digital assets and buy-now pay-later lending. Ministers are also poised to back a swathe of regulatory reforms in the new financial services and markets bill, expected to be announced by Chancellor Nadhim Zahawi today.
Questions have been raised over capacity at the regulator however and whether its workforce is fit to meet its growing remit.
Rathi said today the FCA had hired almost 500 people in 2022 and was aiming to bolster headcount by a further 500. But figures published in the annual reports show that total staff fell this year to 4,027, down from 4,194 earlier in the year.
The FCA’s enforcement data also showed that while enforcement activity at the regulator was similar to last year, the timelines have lengthened.
Law firm WilmerHale said the average length of regulatory and civil cases combined jumped from 24.7 last year to over 33 months this year, “while the number of cases concluded this year has fallen to a five-year low”.
“One may reasonably ask why the FCA is taking longer to investigate and conclude its cases, especially given that the effects of the pandemic were far less acute during the last twelve months,” said David Rundle, regulatory lawyer at WilmerHale.
“The answer may lie in staff departures, which have ostensibly been so significant as to require the recruitment of 500 people since January, with more to come.”
An FCA spokesperson told City A.M “the pandemic and its impact on workplaces had a significant factor on timelines” but it aims to complete investigations within 12 months.
“As with other agencies across the world, we are also dealing with processing increasingly large volumes of digital evidence,” a spokesperson said.
“However we have delivered results in major cases, including the first criminal prosecution of a bank under the Money Laundering Regulations.”