FCA vows to slash red tape by 70 per cent for investment firms
The Financial Conduct Authority (FCA) has laid out new rules as it bows to government pressure to slash the amount of red tape on investment firms.
The move, designed to streamline what types of funds investment firms must hold to absorb losses and maintain financial resilience during periods of stress, is expected to reduce the number of rules by as much as 70 per cent.
Instead of changing the rules about how much capital firms must hold, the proposals aim to consolidate the existing rules about what qualifies as regulatory capital.
Originally, the EU-derived regulatory capital rules were designed solely for banks, leaving them too complex for the business model of many investment firms.
“There are large sections which are not relevant to the vast majority of firms, and others we have made simpler,” the FCA said, adding that it did not expect firms to change their capital arrangements as a result of the update.
The move comes as part of a wider campaign from Chancellor Rachel Reeves to slash the amount of red tape put in place by regulators, especially in the financial sector.
Last month, regulators were handed 60 ‘growth boosting measures’ by the Chancellor, such as a review on the £100 cap for contactless payments and a simplification of mortgage lending rules.
A new Regulatory Innovation Office, which was launched in October, will be overseeing the efforts to freshen up the watchdogs, led by former science minister Lord Willetts.
“We are always trying to be a smarter regulator, and part of that agenda is reducing unnecessary burdens on firms,” said Simon Walls, interim executive director of markets at the FCA.
“The aim here is to make the rules around how firms hold their capital simpler for the vast majority of firms.”
“We want the revised framework to be proportionate, effective, and aligned with the needs of investment firms while maintaining high standards of financial resilience and consumer protection.”