‘More of the same’: City lawyers sceptical of FCA’s five-year plan
The Financial Conduct Authority (FCA) has set out a new five-year strategy, including details about its secondary objective to support the growth and competitiveness of the UK economy.
In a speech today, FCA chief operating officer Emily Shepperd outlined the four key themes that the City watchdog would be focusing on: Growth and innovation, financial crime, consumer reliance, and efficiency as a regulator.
“As a regulator, we cannot grow the economy in and of itself, but there are ways we can facilitate that growth,” said Shepperd.
However, the plan has come under fire from the City for being “nothing new” that hasn’t been promised “100 times already”, said Simon Morris, financial services partner at law firm CMS.
“What the FCA is really saying is “we’ll do more of the same – but we’ll do it better”. This is promising – but we need wholesale cultural change. Progress will be patchy until all levels of the FCA stop treating firms as tricky adversaries.”
A bombshell report from a group of MPs today accused the FCA of being “incompetent” and “defective”, with attempts to transform itself over the past four years described as a “failure”.
“Given recent observations that the FCA has lost touch with its objectives, it is hardly surprising that the FCA refers to economic growth and innovation, but to be meaningful, such plans need to incorporate large and differing parts of the financial services sector,” added Richard Burger, partner at WilmerHale. “The FCA needs to invest in its staff, so they better understand the sector, and to effect a shift in the current supervisory culture.”
Shepperd’s speech contained scant details of how it was looking to implement its secondary growth and competitiveness objective, which was introduced in July last year.
The watchdog’s COO said that the FCA was looking to “reduce the cost of regulation, or more specifically, to ensure there is good value from it”.
Meanwhile, she said it was also aiming to support innovation, such as through its regulatory sandbox, AI lab, and exploring new opportunities in open banking, open finance and private finance.
“It is promising that the cost of regulation has also been acknowledged,” said Jake Green, global head of financial regulatory at law firm Ashurst. “However, the proof of the pudding is of course in the eating.”
Shepperd also made a nod to the FCA’s upcoming plans to improve retail access to bond markets, which has not been fully revealed.
However, she did add that the FCA was “working to refine the line between advice and guidance,” an area that the industry has been calling for clarification on.
Vanguard, in particular, has said it was “very excited” about reviews from the Treasury and the FCA on the topic, which could allow for a middle way between the two areas, which the company has termed “targeted advice”.
“If we start to see movement over the next five months, then the next five years could be extremely promising,” added Green.
In a bid to address the regulatory burden that checks like know-your-customer and anti-money-laundering rules place on firms, Shepperd also floated the idea of digital passports to address the issue.
“We have no intention of eroding the high standards the UK is known for. Financial crime not only harms consumers but is a drain on economic growth – it’s in all our interests to fight it,” she said. “But we also hear concerns about the cost of financial crime controls.”