Speaking on an FCA podcast, Bailey (pictured) said the make-up of the financial services industry had changed significantly, with 58,000 firms under the FCA’s oversight, more than double what its predecessor the Financial Services Authority (FSA) had to manage.
“The balance of firms has changed, you’ve got far more small firms,” he said.
“I think also the world has moved on in the sense that the FCA, when it was setup, was designed in a world where the most prominent conduct problems were coming from big firms, so LIBOR, FX-manipulation, payment protection insurance (PPI), were all basically big firm problems and the FCA was setup with that in mind.
“Today, we’ve got a lot more small firms,” he continued.
“I don’t want for a moment to pretend that the big firms are virtuous all the time, because they’re not but relatively speaking, and I emphasise “relative”, the challenge for us has shifted.
“[It has] shifted more towards the small firm world and of course the very numerous small firm world and we have to respond to that and we have to adapt how we go about our task and meet our objectives in a world where that challenge has changed,” he added.
Bailey also noted that to help target this risk and conduct management the regulator needed to become more data savvy.
“Just to operate in our world these days, we have to be able to put data to use, analyse data, we have to become a data driven organisation,” he said.
This should allow the regulator to “look across the peer group of firms that you look at, to frankly say, ‘Who are the ones that I should be focusing on?’ because we can’t focus on 58,000 firms every day of the week, that’s just not possible.”
“So, we have to have tools that help us all to do that task,” he continued.
“I think we’ve made a good start on that front, let’s face it, the FCA is regarded internationally as a leader in this field among regulators, something we should be very proud of, but we’ve got a lot to do.”