In a speech at the UK Finance dinner, Financial Conduct Authority (FCA) CEO Nikhil Rathi said the industry is on track to implement the regulatory framework, due to go live to advisers and mortgage lenders in July 2023 and for closed book lenders the following year.
Rathi said the regulator would judge the success of the legislation on the number of complaints going to the Ombudsman and any increases in levels of trust picked up by its regular survey. The watchdog said it would track and drive down the cost of the Financial Services Compensation Scheme (FSCS), particularly to small business.
Rathi said: “Ultimately, meeting these targets and embedding the Consumer Duty are in firms’ interests too. And after some heavy lifting upfront, it should also mean fewer reactive rules created by us in the coming years. We will monitor how the duty is working and look forward to hearing from you about changes we can make to further simplify our rule book.”
He said the regulation would also be critical to shaping a framework to closely monitor artificial intelligence, which in turn would spot signs of physical or financial vulnerability earlier.
C-suite taking the lead
In one example, he said the CEO of a Japanese insurance firm said that the data they use can predict the weather and foresee natural disasters, and for consumers spot early signs of dementia.
Rathi said: “The CEO suggested a future insurance policy would pay out on the first sign of dementia as well as use data to encourage customers to change their lifestyle to stave off its onset for several years. At a conference hosted by our Dutch colleagues in Amsterdam this year, I heard from a chief technology officer of a major bank who said their firm had piloted an AI tool that could predict with 99 per cent accuracy a customer’s bank balance in a year’s time,” he added.
He defended the regulator from industry accusations that Consumer Duty could bring risk aversion in firms and the withdrawal of products for difficult to reach groups.
“We will be monitoring closely to make sure this does not happen,” he said. “That is why the Consumer Duty has a particular focus on vulnerable consumers and taking reasonable steps to ensure informed decision making,” he added.
“And while the Consumer Duty will help firms and consumers in future navigate the cost of living crisis, we remain focused on what is happening on the ground today, including how consumers are being treated.”
