The Financial Conduct Authority has launched a new five-year strategy, encouraging firms to take more “informed risk” in a bid to drive economic growth.
The City watchdog said it plans to take a “less intensive approach” for firms seeking to do the right thing.
Ashley Alder, chair of the FCA, said: “We want to deepen trust in financial services and shift our collective attitude across financial services to risk.
“Too often the focus has been on the risks of a decision taken rather than the lost opportunity of taking none. We want to change that so we can spur growth and improve lives.”
The FCA said regulation should be about enabling informed risk to be taken, not eliminating it entirely. It warned that eliminating risk would stifle innovation and competition and with it, the market dynamism that drives growth.
“Consumers who use financial services make choices, meaning they often take risks. Needs will change as life circumstances change. To rebalance these risks we must acknowledge, as we have with our proposals to reform the financial advice market, that while the majority may benefit, a minority may not get the outcome for which they hoped,” the FCA said in its strategy.
The five-year strategy from 2025 to 2030 sets out four key priorities the regulator intends to focus on as part of its drive to deepen trust, rebalance risk and support growth.
These include becoming a smarter regulator, embracing technology to become more efficient and effective; supporting sustained economic growth by enabling investment and innovation; and helping consumers navigate their financial lives by working with the industry to boost trust and product innovation.
Finally, it plans to fight financial crime, vowing to take further action to disrupt criminals and support firms to be an effective line of defence.
Nikhil Rathi, chief executive of the FCA, said: “Our four priorities reinforce one another and we look forward to collaborating with our partners as we become a smarter regulator, support growth, help consumers and fight crime.
“We are ambitious for the future and committed to enabling a fair and thriving financial services market for the good of consumers and the economy.”
The FCA said that as it integrates the Payment Systems Regulator, it will build on the success of Open Banking and launch Open Finance. This will allow for more seamless data-sharing which could unlock product innovation and deliver lower costs, more choice and better information for consumers.
The new strategy was welcomed by industry experts.
Hannah Gurga, director general of the ABI, said: “The FCA’s latest strategy sets a positive direction for the future of regulation. We fully support its focus on encouraging growth through investment and innovation, and its intention to be a predictable, purposeful and proportionate regulator. This will be crucial to provide certainty for our industry and its customers.
“It’s encouraging that the FCA’s immediate areas of action include ensuring its approach to the Consumer Duty supports both effective competition and innovation, as well as providing fair value for consumers. We look forward to seeing more detail on this later this year.”
Stephen Lowe, group communications director at Just Group, said: “One question inherent in regulation is how much consumers need to be protected from their own poor choices or bad luck. The FCA’s strategy acknowledges that some risk is good even if it means a minority will not get the outcome they hoped for. So long as firms and advisers are doing the right thing – that is, adhering to their obligations under the Consumer Duty and other rules – then the system has done its job.”
However, Lowe said that there is also acceptance that people are not yet getting the support and information they need to make decisions for their financial futures.
“Certainly, use of regulated advice by people accessing pensions has fallen so there is a lot riding on the success of the changes likely to be brought in following the advice-guidance boundary review although that is still some way off. So, we welcome this five-year strategy and look forward to seeing its measures come to fruition,” he added.
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