FCA: We don’t want to take risk decisions alone
The City watchdog should not be determining the UK’s risk appetite “alone”, a top official has said, as the regulator continues to try and coax more guidance from the government on its growth push.
Sarah Pritchard, the deputy chief executive of the Financial Conduct Authority (FCA), said the regulator was trying to “prompt” a wider conversation about the kinds of risks the government was willing to tolerate.
“We think it’s really important that we don’t take decisions around UK national risk appetite alone,” she said in an interview with the Following the Rules podcast, arguing that there were always “trade-offs” to regulatory decisions.
“If there are more people that have a mortgage, in the event of an economic downturn, more people could see repossessions,” she said.
“If there is a greater culture of retail investment in the UK, which we believe would be a good thing for consumers, in the event of the market downturn, consumers will lose money.
“Those are the trade-offs and the risk appetite decisions that we debate. We are raising them whenever there are choices to be made through our consultation process,” she said.
Growth push
Regulators have faced intense political pressure over the past year to strip back regulations which are hamstringing economic activity.
In March last year, Chancellor Rachel Reeves said the economy was suffering from “too much bureaucracy,” announcing that regulators would be called in front of the relevant minister for twice-yearly appraisals to assess their progress.
In response the FCA has made a series of changes to its regulatory rulebook, including streamlining rules on mortgage lending and changing investment communications for retail investors.
In recent years, the watchdog has also made a series of changes to the listing rules in a bid to address the sharp drop-off in listings and reinvigorate the UK’s public markets.
But senior FCA executives have called for more urgency across the system. “We’re doing our bit here, but the entire system needs to move,” Nikhil Rathi, the FCA’s chief executive, said in a parliamentary hearing at the end of last year.
Rathi has also asked the government to provide ‘metrics of tolerable failure’ which would inform their regulatory decisions. Pritchard said the FCA was “regularly” speaking to the government and parliamentarians about the trade-offs involved in driving growth.
“It is important that those (regulatory) choices are informed by a political accountability system and that then in the future if things go wrong, we have the confidence as the UK to know that we made active decisions around risk,” she said.
“It’s an ongoing conversation,” she said. “It can be difficult at times to put metrics around what is meant, but we are really trying to prompt it.”